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Yam sees currency basket for yuan

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1 Yam sees currency basket for yuan on Fri Apr 30, 2010 1:34 am


Yam sees currency basket for yuan

Friday, April 30, 2010

A big revaluation in the yuan's exchange rate is unlikely, according to Joseph Yam Chi-kwong, executive vice president of the China Society for Finance and Banking.

Yam also said the Chinese currency is not undervalued. The remarks by the former Hong Kong Monetary Authority chief came as the International Monetary Fund said the yuan is undervalued and called for further reforms.

"The yuan has been rising over the years - not only from July 2005 to 2008 but even before 2005 as a strong US dollar dragged it up," Yam said.

Stressing that he has no inside information, Yam said he believes the yuan would be repegged to a basket of currencies instead of fixing it to the greenback as it was in July 2008.

Yam also said there is no urgency for Beijing to raise interest rates as it has managed to cool the heating economy by tightening credit, especially in the property sector. He said he was glad the central government resorted to credit controls instead of interest rates.

"It's a tool that has `conductive' results though not many free markets can use it," he said.

Yam agreed that the yuan has the potential to be the third global currency, especially when the US dollar and euro are "shaky" amid recent financial and credit crises.

He said he sees no contagion effect yet from the euro zone to the rest of the world, but described the situation as worrisome.


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