Yuan hits high; limit seen to politics-driven rally - Economic Times

SHANGHAI: Spot yuan on Friday hit its highest against the dollar since a landmark revaluation in July 2005, supported by strong expectations of a further strengthening of the Chinese currency amid mounting political pressure.

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In addition to demands from the United States on China for a stronger yuan, European Commission officials said on Thursday that the European Union would keep pressing China to revalue the yuan. The head of the International Monetary Fund, Dominique Strauss Kahn, also told the Le Monde newspaper that China should accelerate the appreciation of the yuan as the undervaluation of the yuan was now the source of tensions in the world economy. In addition to demands from the United States on China for a stronger yuan, European Commission officials said on Thursday that the European Union would keep pressing China to revalue the yuan. The head of the International Monetary Fund, Dominique Strauss Kahn, also told the Le Monde newspaper that China should accelerate the appreciation of the yuan as the undervaluation of the yuan was now the source of tensions in the world economy. "China appears to be making some concessions to external pressure to let the yuan appreciate, with a globally weakening dollar offering a good excuse for it to do so," said a senior dealer at an Asian bank in Shanghai. "But it has a limit not to let yuan appreciation hit its exporters harshly, and most of us believe the limit lies at 6.6 against the dollar in the near term." Indeed, Yi Gang, a deputy governor of the People's Bank of China (PBOC), was quoted as saying on Friday that China would continue to reform its exchange rate regime but a sharp rise in the yuan would harm its economy.

Yuan hits high; limit seen to politics-driven rally - Economic Times