Nov. 22, 2010, 2:47 a.m. EST
China central banker urges rise in yuan
By Chris Oliver, MarketWatch
HONG KONG (MarketWatch) — A senior Chinese central banker indicated Beijing could accept further gains in its currency against the U.S. dollar as part of efforts to help inflation in check, though there was limited immediate reaction in the foreign-exchange market Monday, as the Chinese currency dipped slightly in muted trade.
People’s Bank of China policy board member Li Daokui said Saturday that China should look to broaden the range of the yuan’s currency exchange rate, according to comments reported by the state-controlled China Daily.
“The rapid price rises that the country faces are largely propelled by increasing costs instead of surging demand, leaving room for the Chinese yuan to appropriately appreciate to counter the rising prices of international commodities,” Li was quoted as saying in an address to an economics forum in Beijing.
Bernanke throws down gauntlet
The comments followed Friday’s statement by Federal Reserve Chairman Ben Bernanke, in which he said the world’s monetary and foreign-exchange systems were flawed.
“As currently constituted, the international monetary system has a structural flaw: It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances,” Bernanke said. See report on Bernanke’s recent comments.
Economist and financial author Richard Duncan said Sunday that the speech represented the most important shift in U.S. trade policy in a generation.
Duncan said that by voicing its concerns, the Fed had committed itself to a course that will either result in international coordination or punitive trade tariffs, likely similar to the across-the-board 10% surcharge on imports set in 1971 following the collapse of the Bretton Woods currency pact.
“The inference is clear: Now the flaw has been declared, something will have to be done about it,” Duncan said. “The world has been put on notice that the United States will take steps to correct this defect and the destabilizing trade imbalances it permits.”
China’s slipping surplus
Meanwhile, Li reportedly said China’s annual trade surplus would decline to $180 billion this year from $190 billion in 2009, roughly equivalent to 3.5% of gross domestic product.
Before the global crisis hit, China’s trade surplus was equivalent to 7.9% of GDP, the China Daily reported Li as saying.
In October, Li had said China should target annual appreciation in the yuan of 3% to 5%, based on domestic considerations.
In early afternoon trades in east Asia on Monday, the dollar fetched 6.6403 yuan, strengthening from Friday’s closing level of 6.6395 yuan. The People’s Bank of China set the daily fixing point at 6.6389 yuan on Monday, compared to Friday’s 6.6408 yuan.
In related currency action, China on Monday added the Russian ruble to the currencies traded against the yuan in its onshore markets, according to reports.
The Russian currency joined the U.S. and Hong Kong dollars, the euro, yen, British pound and Malaysian ringgit as units offered on the central bank’s China Foreign Exchange Trade System.
Chinese officials said yuan/ruble forwards and swaps may be offered in the future, according to Dow Jones Newswires. The yuan will be allowed to move 5% on either side of a daily parity rate with the ruble, as is the case in the yuan’s trade with the U.S. dollar.
The yuan changed hands at 4.6711 rubles in early Monday trading, according to Reuters.
China central banker urges rise in yuan
By Chris Oliver, MarketWatch
HONG KONG (MarketWatch) — A senior Chinese central banker indicated Beijing could accept further gains in its currency against the U.S. dollar as part of efforts to help inflation in check, though there was limited immediate reaction in the foreign-exchange market Monday, as the Chinese currency dipped slightly in muted trade.
People’s Bank of China policy board member Li Daokui said Saturday that China should look to broaden the range of the yuan’s currency exchange rate, according to comments reported by the state-controlled China Daily.
“The rapid price rises that the country faces are largely propelled by increasing costs instead of surging demand, leaving room for the Chinese yuan to appropriately appreciate to counter the rising prices of international commodities,” Li was quoted as saying in an address to an economics forum in Beijing.
Bernanke throws down gauntlet
The comments followed Friday’s statement by Federal Reserve Chairman Ben Bernanke, in which he said the world’s monetary and foreign-exchange systems were flawed.
“As currently constituted, the international monetary system has a structural flaw: It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances,” Bernanke said. See report on Bernanke’s recent comments.
Economist and financial author Richard Duncan said Sunday that the speech represented the most important shift in U.S. trade policy in a generation.
Duncan said that by voicing its concerns, the Fed had committed itself to a course that will either result in international coordination or punitive trade tariffs, likely similar to the across-the-board 10% surcharge on imports set in 1971 following the collapse of the Bretton Woods currency pact.
“The inference is clear: Now the flaw has been declared, something will have to be done about it,” Duncan said. “The world has been put on notice that the United States will take steps to correct this defect and the destabilizing trade imbalances it permits.”
China’s slipping surplus
Meanwhile, Li reportedly said China’s annual trade surplus would decline to $180 billion this year from $190 billion in 2009, roughly equivalent to 3.5% of gross domestic product.
Before the global crisis hit, China’s trade surplus was equivalent to 7.9% of GDP, the China Daily reported Li as saying.
In October, Li had said China should target annual appreciation in the yuan of 3% to 5%, based on domestic considerations.
In early afternoon trades in east Asia on Monday, the dollar fetched 6.6403 yuan, strengthening from Friday’s closing level of 6.6395 yuan. The People’s Bank of China set the daily fixing point at 6.6389 yuan on Monday, compared to Friday’s 6.6408 yuan.
In related currency action, China on Monday added the Russian ruble to the currencies traded against the yuan in its onshore markets, according to reports.
The Russian currency joined the U.S. and Hong Kong dollars, the euro, yen, British pound and Malaysian ringgit as units offered on the central bank’s China Foreign Exchange Trade System.
Chinese officials said yuan/ruble forwards and swaps may be offered in the future, according to Dow Jones Newswires. The yuan will be allowed to move 5% on either side of a daily parity rate with the ruble, as is the case in the yuan’s trade with the U.S. dollar.
The yuan changed hands at 4.6711 rubles in early Monday trading, according to Reuters.