Center

Yuan climbs to record as more rises seen

(Shanghai Daily)
Updated: 2007-05-01 09:44

The yuan climbed to another record high on the last trading day before the golden week May Day holiday break on bullish sentiment and speculation the central bank will allow further rises as it tries to cool the economy.

The Chinese currency settled at 7.7039 against the US dollar, the highest since China abandoned the decade-long fixed exchange rate of 8.28 to the US currency on July 21, 2005. The People'sBank of Chinaset the parity rate at 7.7055, beating the earlier record of 7.7139 on Friday.

"Optimism is high before the holiday break, and the market is expecting a further appreciation (of the yuan) as the central bank moves to slow the economy," said Xie Zengling, aShanghai-based trader at Bank of China.

The central bank on Sunday ordered lenders to set aside more money as reserves for the seventh time in 11 months to rein in lending.

The reserve ratio - the amount of money a bank must keep at the central bank - will rise 0.5 percentage point to 11 percent on yuan deposits starting on May 15.

Analysts have already predicted more measures by the central bank including a rise in reserve requirement, a higher interest rate this year, as well as a more flexible yuan to slow the economy which expanded by a faster-than-expected 11.1 percent in the first quarter.

The country's trade surplus soared to US$46.4 billion through March, up US$23.1 billionyear on year.