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Renminbi Rises to Record High of 6.3950 per U.S. Dollar on Monday

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Renminbi Rises to Record High of 6.3950 per U.S. Dollar on Monday

15 Aug 2011

August 15, The People’s Bank of China (PBoC), the central bank, on Monday raised the renminbi’s daily central parity rate by 22 basis points to a record high since a landmark revaluation in 2005, according to the China Foreign Exchange Trade System.

The Chinese currency’s fresh central parity rate was fixed at 6.3950 per U.S. dollar on Monday, a new high for the fourth straight trading day as the greenback fell after weak consumer sentiment data in the world’s No.1 economy.

On China’s foreign exchange spot market, the currency can rise or fall 0.5% from the central parity rate each trading day.

The sharp appreciation in the renminbi against the dollar in recent days echoes a senior PBoC officials comments in May that China was planning to widen the daily fluctuation band for the renminbi-U.S. dollar exchange rate to enhance its flexibility and curb stubbornly high inflation. China’s headline inflation hit a 3-year peak in July and has already led to social unrest.

Over the past week the renminbi has strengthened 0.8% against the dollar — a small move by the standards of most currencies but the best performance since 2007 for the Chinese currency, which is tightly controlled by the government. It touched a 17-year high of 6.3890 per U.S. dollar on Aug. 12.

Although the U.S. has assured China — its biggest treasury bond holder — that the latter’s investments in the greenback are safe, a sustained downtrend in the U.S. dollar may prompt China to decide to stop accumulating so many US dollars in its foreign exchange reserves, especially after the U.S. government lost its triple A credit rating from Standard & Poor’s Rating Services.

The central parity rate of the renminbi against the U.S. dollar is based on a weighted average of prices before the opening of the market each business day.

The Chinese currency has strengthened in value by 6.33% against the U.S. dollar since the central bank let the renminbi float against the U.S. dollar within a wider range after scrapping a 2-year peg on June 19 last year, and 3.44% so far this year. Experts have predicted that the unit could appreciate by as much as 7% in 2011.


nice....thnx gente!

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