Monday, March 1, 2010 - 05:41
China SAFE's Yi: High Domestic Rates Fuel Yuan Rise Expect'ns
BEIJING (MNI) - China's relatively high interest rates are helping fuel expectations that the yuan will appreciate, the head of the government foreign exchange reserve management agency said in comments published Monday.
State Administration of Foreign Exchange director Yi Gang, who is also a vice-governor of the People's Bank of China, warned of emerging market risks as low rates in the industrialized economies fuel a massive carry trade.
"Huge carry trade transactions have pushed a clear appreciation of emerging market currencies, including India's and Brazil's," he said in a short review of 2009 and outlook for this year.
"Stock and property prices have risen very fast and potential risks are increasing."
He noted estimates that the carry trade during the first half of last year alone was between $250 billion and $550 billion.
China still maintains extensive capital controls designed to limit flows in and out of the country, but Yi warned that the country is not immune from the global search for yield.
"Because our country's interest rates are relatively high, yuan appreciation expectations have strengthened," he said.
He also touched on SAFE's strategy for managing China's $2.4 trillion foreign exchange reserves but largely stuck to regularly employed language, including a pledge to broaden investment channels.
But he also said that the agency will "improve its diversification strategy and optimize currency allocation," without providing further details.
China SAFE's Yi: High Domestic Rates Fuel Yuan Rise Expect'ns
BEIJING (MNI) - China's relatively high interest rates are helping fuel expectations that the yuan will appreciate, the head of the government foreign exchange reserve management agency said in comments published Monday.
State Administration of Foreign Exchange director Yi Gang, who is also a vice-governor of the People's Bank of China, warned of emerging market risks as low rates in the industrialized economies fuel a massive carry trade.
"Huge carry trade transactions have pushed a clear appreciation of emerging market currencies, including India's and Brazil's," he said in a short review of 2009 and outlook for this year.
"Stock and property prices have risen very fast and potential risks are increasing."
He noted estimates that the carry trade during the first half of last year alone was between $250 billion and $550 billion.
China still maintains extensive capital controls designed to limit flows in and out of the country, but Yi warned that the country is not immune from the global search for yield.
"Because our country's interest rates are relatively high, yuan appreciation expectations have strengthened," he said.
He also touched on SAFE's strategy for managing China's $2.4 trillion foreign exchange reserves but largely stuck to regularly employed language, including a pledge to broaden investment channels.
But he also said that the agency will "improve its diversification strategy and optimize currency allocation," without providing further details.