china and the yuan
China mulls raising yuan 30 pct vs dlr in 5 yrs-Jiji
Monday October 6, 4:37 am ET
TOKYO, Oct 6 (Reuters) - China's central bank is considering raising the value of the yuan by nearly 30 percent against the U.S. dollar over the next five years, Japan's Jiji news agency reported on Monday, citing financial sources in Beijing.
Jiji said the plan gradually to revalue the yuan from its present range of 8.2760/8.2800 per dollar was still in the early stages of discussion and no specific time frame had been set.
The dollar fell to a low for the day of around 110.85 yen (JPY=) from around 111.05 on the Jiji report, but later edged up to 111. Yuan non-deliverable forward markets (CNYNDF=) showed little reaction, holding under Friday's record levels.
The yuan's value has attracted increasing criticism from Europe and the United States, who argue that the Chinese currency is undervalued and costing them exports and jobs.
On Friday, U.S. President George W. Bush vowed to press other countries to adopt currency policies that offered a "level playing field" for American companies.
Non-deliverable forwards (NDF) on the yuan have risen to record premiums against the dollar as markets bet on a Chinese revaluation ahead of the U.S. elections next year.
At Monday afternoon's quote of 4,400 points, the NDF market was pricing in a rise of over 5.5 percent to about 7.84 per dollar in the next 12 months. On Friday, trades were reported at 5,500 points.
"In addition to the one-year implied forward now pricing in a five percent move, yuan volatility has risen sharply, both implying that the markets are -- correctly -- pricing the risks of a bigger and less predictable move than the consensus believes," Jim O'Neill, head of global economic research at Goldman Sachs, said in a note.
"We think that this is very logical and the kind of eventual move mentioned by Jiji this morning is quite reasonable."
Last month's call by the Group of Seven nations for more flexibility in exchange rates was seen as putting pressure on China and Japan, and Asia more broadly, to slow their dollar-buying intervention. China is not a member of the G7.
Since the meeting on September 20, the yen has surged to three-year highs, and taken most other Asian currencies with it.
China has repeatedly said it would eventually allow more movement in the yuan, but that its focus is on domestic stability as it reforms the economy. Because of this, most analysts and traders are doubtful of any quick action by the People's Bank of China. |
