*http://news.xinhuanet.com/english/2007-07/10/content_6353395.htm
China's yuan hits new high against U.S. dollar BEIJING, July 10 (Xinhua)*-- China's currency, the yuan, hit a new high against the U.S. dollar on Tuesday, according to the Chinese Foreign Exchange Trading System. The value of the yuan went up 240 basis points from Monday's 7.6085 against the U.S. dollar to open for trade on Tuesday at 7.5845, the highest rate since the yuan was revalued by 2.1 percent from 8.28 yuan in July 2005. It is the 49th time that the yuan's value has hit a record this year, climbing by 2,242 basis points from 7.8087 on the last trading day of 2006. The weak U.S. dollar on the international market was the main reason for the yuan's appreciation, said Ye Yaoting, a senior analyst with the Shanghai-based Bank of Communications. The yuan's performance against other currencies such as the euro had been much less spectacular. Ye said the yuan was brought under pressure, with the United States complaining a slow appreciation gave Chinese exporters unfair trading advantages. China's customs authorities said on Tuesday the country's monthly trade surplus hit a new high of 26.91 billion U.S. dollars in June, up 85.5percent over the same month last year. But this was mainly because domestic companies, whose export tax rebates were cut on July 1, were rushing exports, said Huang Guohua, senior analyst with the General Administration of Customs. The government announced on June 19 it would cut or eliminate export tax rebates for 2,831 commodities from July 1 in an attempt to "suppress overheated export growth and ease frictions between China and its trade partners". With June's consumer price index, China's inflation rate, predicted to remain above three percent, the market expectation for an interest rate hike had also pushed up the yuan's value, said Ye. The nominal effective and real exchange rates of the yuan had risen 4.2percent and 4.41 percent since July 2005, Tuesday's Shanghai Securities News reported, citing figures from the Bank for International Settlements. A rise in the effective exchange rate would probably exert a downward force on the trade surplus in the following one or two months, said the report. The report quoted Yi Gang, assistant governor of People's Bank of China, as saying last weekend, "The exchange rate of the yuan would gradually grow more flexible in the future, but remain basically stable in a rational and balanced manner." The central bank said in May that it would allow the yuan to fluctuate against the U.S. dollar by 0.5 percent a day, up from 0.3 percent. A gradual appreciation would bring about fewer risks and upheavals in China's economy than an abrupt one and "the yuan needs to strike a new balance between three imperatives", Fan Gang, a member of the central bank's Monetary Policy Committee, said earlier this year. The floating band must be "relatively small and stable" to curb speculation, the appreciation must help reduce China's trade surplus, and domestic firms should be made to upgrade production methods without being seriously hurt. Editor: Liu Dan [Non-text portions of this message have been removed]
