Aug 11, 2011
The yuan strengthened beyond 6.4 per dollar for the first time in 17 years, supported by the Federal Reserve’s pledge to keep interest rates at a record low and signs China will use currency gains to help rein in inflation.
The currency rose 0.37 percent to close at 6.3945 in Shanghai, its biggest jump in nine months, according to the China Foreign Exchange Trade System. It touched 6.3895, the strongest level since the country unified official and market exchange rates at the end of 1993. The central bank’s reference rate was boosted 0.27 percent to 6.3991.
The International Monetary Fund said last month a stronger yuan would help stabilize the global economy, as well as aid government efforts to tame inflation and rebalance the nation’s growth toward domestic demand and away from exports. Data this week showed record overseas sales helped drive China’s trade surplus to a two-year high in July and consumer prices rose the most in three years.
“The inflation and trade data, together with the Fed’s policy to maintain extremely low interest rates, have fueled faster appreciation,” said Banny Lam, an economist at CCB International Securities in Hong Kong. “Strong economic growth, supported by the latest export figures, also provides investors with confidence to buy the yuan in these turbulent times.”