The Chinese currency rose to a fresh high against the US dollar yesterday but analysts believe the appreciation is not unexpected.
The People's Bank of China, the central bank, set the central parity rate a benchmark set on the basis of weighted average prices given by market makers at 7.8402, breaching the 7.85 psychological barrier.
The value of the renminbi has risen by 5.31 per cent since July 21 last year, when the government reformed the exchange rate system to allow the yuan to float against the US dollar within a daily 0.3 per cent band from the official central parity rate.
The exchange rate was set at about 8.27 per US dollar before the reform.
"Given the trend of the yuan's appreciation (in the past months), today's rise has not surprised us," Wang Hong, a Shanghai-based analyst, said yesterday.
The US currency has been falling globally, especially ahead of a speech to be given today by Federal Reserve Chairman Ben Bernanke, which may further drive down the value of the greenback, analysts said.
Moreover, the expected visits by Bernanke and Treasury Secretary Henry Paulson to China also contributed to the upward movement of the renminbi. Many market watchers believe they will press the Chinese Government to revalue the yuan, which Washington says is undervalued.
Politics, however, is not the main factor behind the renminbi's appreciation. "At a certain point, news about such visits may affect the instant movement of the yuan," said Li Yongsen, researcher with Renmin University of China's Financial and Securities Institute. "But they are only temporary."
