China's currency hit a 12-year high yesterday and the Asian
Development Bank (ADB) indicated the renminbi (RMB) may appreciate
by 3 percent this year.
In an unusual move?ADB,?an Asian policy bank supported
by numerous regional members, made the forecast in its annual
Asian Development Outlook journal published yesterday.
It based its prediction on discrepancies between the US dollar
and a basket of currencies used by China to set its currency
against the dollar.
Tang Min, chief economist with the China Mission of ADB, said
the forecast represents the expectations of the currency
market.
The exchange rate of the Chinese yuan reached a 12-year high
against the US dollar, which almost made the magic number of eight
yuan to one dollar. It closed at 8.0098 to the dollar
yesterday.
The RMB chalked up its biggest ever weekly appreciation last
week, up more than 3 percent since China's exchange rate reforms
last July when the value of the yuan was linked to a basket of
currencies rather than being pegged directly to the US dollar.
Last July China raised the value of the yuan by 2 percent
allowing the RMB yuan to be traded at a rate of 8.11 to the US
dollar, thus scrapping its decade-old pegging of one dollar to 8.27
yuan.
The US has complained that the rate is still too high and
American manufacturers contend that the RMB is undervalued by as
much as 40 percent, which gives Chinese exporters an "unfair" price
advantage and hurts the US labor market.
China's central bank said last month it will increase
flexibility of the currency.
Cao Honghui, a finance research fellow with the Chinese Academy
of Social Sciences, said the yuan's recent appreciation will be
welcome news as President Hu Jintao prepares to visit the US.
(Xinhua News Agency April 7, 2006)