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Hong Kong Exchanges’ Arculli Sees ‘Gradual’ Yuan Appreciation

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Hong Kong Exchanges’ Arculli Sees ‘Gradual’ Yuan Appreciation
April 08, 2010, 6:58 AM EDT

April 8 (Bloomberg) --Hong Kong Exchanges & Clearing Ltd.’s Chairman Ronald Arculli said the appreciation of China’s currency will be a gradual process rather than a “big bang” and the bourse is ready to handle multi-currency settlement.

Arculli’s comments, made in an interview today, came as U.S. Treasury Secretary Timothy F. Geithner’s unscheduled trip to China fanned speculation the yuan will strengthen this quarter. Geithner, who is facing demands from Congress to label the Asian nation a currency manipulator, left Hong Kong for Beijing today where he was due to meet Vice Premier Wang Qishan.

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.

“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, has been chairman of the company that operates 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.

Fastest-Growing Economy

Investor Jim Rogers told Bloomberg Television today China will eventually allow its currency to appreciate because a strong yuan is needed to help the world’s fastest-growing economy fight inflation. The International Monetary Fund predicted in January that China’s economy will grow 10 percent this year and 9.7 percent in 2011. The world economy will expand 3.9 percent this year after contracting 0.8 percent in 2009, the IMF said.

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.

The yuan’s advance has “been quite a gradual process, and I don’t think you will get a big bang,” Arculli said. Three-month non-deliverable forwards strengthened 0.2 percent to 6.7590 per dollar today 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 Meeting

Geithner met with Hong Kong officials including Hong Kong Chief Executive Donald Tsang and Financial Secretary John Tsang for a courtesy call. Neither side would comment on what was discussed.

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 Jan. 15.

“The more yuan you have outside of mainland China, the greater the interest will be in yuan products,” Arculli said. “Our infrastructure can handle multi-currency settlement.”

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