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CHINA / National

Yuan has biggest gain against dollar
(Bloomberg)
Updated: 2006-04-19 14:52

The Chinese yuan had its biggest gain against the dollar since last year's revaluation on speculation that pressure from U.S. President George W. Bush and strengthening Asian currencies will force China to allow faster gains.

 
A shopper hands Chinese money to a cashier in Beijing in this May 27, 2004 file photo. China scrapped the yuan's peg to the U.S. dollar on July 21, 2005 and it tied it to a basket of currencies, the central bank said, the first steps in highly anticipated reforms aimed at letting the currency float freely.[Reuters]
Bush plans to ask China's President Hu Jintao in a meeting in Washington Thursday for a more flexible yuan.

Wednesday's rally followed gains in Asian currencies and the euro after the U.S. Federal Reserve signaled it may soon stop raising interest rates.

China's currency has gained 1.2 percent since July 21, when the yuan was revalued by 2.1 percent and its peg to the dollar replaced by a managed float against a basket of currencies including the euro and yen. Surging exports and investment in manufacturing helped China's economy grow 9.9 percent last year and contributed to a record $102 billion trade surplus.

"The U.S. will continue to pressure China," said Thio Chin Loo, a currency strategist at BNP Paribas SA in Singapore. "Given a stronger yen and euro, the central bank will allow the dollar-yuan to go lower."

The currency climbed 0.1 percent to 8.0158 per dollar as of 1:18 p.m. in Shanghai, according to data Bloomberg compiled. It rose as much as 0.14 percent, almost half the 0.3 percent it can gain or fall from a daily mid-rate the central bank announces.

The swings in the currency added to speculation China will allow wider daily swings in the yuan. The People's Bank of China may widen the overall daily band in which it allows the currency to move to as much as 1.5 percent against the dollar, and the yuan may rally to 7.6 by the end of the year, said Thio at BNP.

"Market Forces"

Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress, or parliament, called for China to widen the trading band at an appropriate time, the Hong Kong-based Wen Wei Po newspaper reported on April 4.

Cheng's comments represent his own views, said an official at the central bank press office, who declined to be named.

U.S. government officials and lawmakers have blamed their country's trade deficit with China, which has set a record for five straight years, on an allegedly artificially weak yuan.

Treasury Secretary John Snow Tuesday said China hasn't allowed enough movement in the currency after President Bush on April 10 said he wanted Hu to explain at their meeting how he would allow more gains. The dollar fell in Asia Wednesday against all 16 major currencies that Bloomberg tracks.
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