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No 'big bang' seen in yuan's appreciation

Updated: 2010-04-09 07:06

(HK Edition)

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Hong Kong Exchanges & Clearing Ltd's Chairman Ronald Arculli said Thursday that the appreciation of China's currency will be a gradual process rather than a "big bang" and that the bourse and its financial infrastructure are ready to handle multi-currency settlement.

"Where the economic recovery of the global market place is still patchy, and not as solid as we would like to see, currency issues are very sensitive," Arculli, 71, said. "The internationalization of the renminbi is a stated objective of the central government, but the timing of it, how we get there, and all that is what we call 'work in progress'."

Arculli, a lawyer, is chairman of the company that has been operating Asia's third-largest stock exchange since April 2006.

He has served on Hong Kong's Executive Council, a body that advises the city's chief executive on policy making.

The yuan strengthened 21 percent in the three years to July 2008, before China blocked its appreciation to help exporters weather a global recession. The Chinese central bank has kept the yuan around 6.83 per dollar since then. The country should move toward a more flexible exchange-rate policy to help promote global economic growth, Geithner said on April 3.

Investor Jim Rogers told Bloomberg Thursday China will eventually allow its currency to appreciate because a strong yuan is needed to help the world's fastest-growing economy fight inflation.

Nobel Prize-winning economist Paul Krugman said last month global economic growth would be stronger if China stopped restraining the value of its currency and running trade surpluses.

Three-month non-deliverable forwards strengthened 0.2 percent to 6.7590 yuan per dollar Thursday in Hong Kong, reflecting bets the currency will climb 1 percent from the spot rate of 6.8245. That's the steepest appreciation indicated by the contracts since July 2008.

Hong Kong Exchanges said in its three-year strategic plan released last month that it will offer yuan-denominated products and plans to become a primary channel for investing by Chinese nationals overseas. China's foreign-exchange reserves, the world's largest, rose 23 percent to $2.4 trillion in 2009, the central bank said January 15.

"The more yuan you have outside the Chinese mainland, the greater the interest will be in yuan products," Arculli said.

Bloomberg News

(HK Edition 04/09/2010 page3)

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