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Thursday, 19 February 2009
Yuan could fall to 6.95 to 7 per dollar, says official
Yuan is not facing pressure to strengthen but could instead weaken to about 6.95 to 7 per US dollar, a senior economic planning official was quoted on Tuesday as saying, sending the yuan down in the offshore forwards market.
Yuan could fall to 6.95 to 7 per dollar, says official
Reuters in Beijing 17 February 2009
Yuan is not facing pressure to strengthen but could instead weaken to about 6.95 to 7 per US dollar, a senior economic planning official was quoted on Tuesday as saying, sending the yuan down in the offshore forwards market.
The yuan has stalled against the US dollar over the past several months, trading at about 6.83 to 6.84 per dollar.
Most economists expect Beijing to keep the yuan more or less steady against the dollar at its current level despite shrinking exports, making the possibility of a depreciation, however mild, all the more surprising.
Asked in an interview with China Briefing magazine about whether there would be any change in the position of the yuan, Zhang Xiaoqiang, deputy head of the National Development and Reform Commission (NDRC), said:
“During [Premier] Wen Jiabao’s trip last month to Europe, we found that the RMB has reached a sustainable and fair level. The currency is not facing any pressure to be stronger. However, our economy this year is weakening, and unemployment is rising. The RMB could weaken to a position of around 6.95 to 7 against the US dollar.”
Mr. Zhang did not elaborate on the timeframe.
The interview was posted on the website of China Briefing, a monthly magazine run by investment advisory firm Dezan Shira & Associates.
One-year dollar/yuan non-deliverable forwards jumped to a 7.0000 bid after Reuters reported the comments, from 6.9500 previously and 6.9350 at Monday’s close.
Offshore one-year vols jumped to a 10-day high of 10.00 per cent bid from 8.50 per cent previous and Monday’s close of 8.25 per cent.
Spot yuan fell moderately against the dollar on news of Zhang’s remarks, to 6.8417 from around 6.8360 previously and Monday’s finish of 6.8340.
The NDRC has a voice in formulating the exchange rate policy, but the strategy is set by the State Council, the country’s cabinet, and implemented by the central bank.
Many traders in Shanghai said they did not think Mr. Zhang’s remarks indicated any change in government policy. Authorities have repeatedly said they want to keep the currency stable for now, particularly because any weakness could prompt capital outflows during the global financial crisis.
“It appears the market noticed Zhang’s comments, but the global strength of the dollar may also be playing the key role in today’s move,” said a dealer at a major mainland bank in Shenzhen.
However, officials may want to underline the possibility of yuan weakness to deflect US pressure to allow its currency to appreciate. US Secretary of State Hillary Clinton is due to visit Beijing for the first time in her role this week.
Beijing criticised US Treasury Secretary Timothy Geithner last month after he said President Barack Obama believed Beijing was “manipulating” its currency and would push for changes, a stance the Obama administration has since softened.
“As to trade or the exchange rate, perhaps they will be discussed if both sides are interested,” foreign ministry spokeswoman Jiang Yu told reporters on Tuesday, speaking of Clinton’s visit.
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Yuan could fall to 6.95 to 7 per dollar, says official
Reuters in Beijing
17 February 2009
Yuan is not facing pressure to strengthen but could instead weaken to about 6.95 to 7 per US dollar, a senior economic planning official was quoted on Tuesday as saying, sending the yuan down in the offshore forwards market.
The yuan has stalled against the US dollar over the past several months, trading at about 6.83 to 6.84 per dollar.
Most economists expect Beijing to keep the yuan more or less steady against the dollar at its current level despite shrinking exports, making the possibility of a depreciation, however mild, all the more surprising.
Asked in an interview with China Briefing magazine about whether there would be any change in the position of the yuan, Zhang Xiaoqiang, deputy head of the National Development and Reform Commission (NDRC), said:
“During [Premier] Wen Jiabao’s trip last month to Europe, we found that the RMB has reached a sustainable and fair level. The currency is not facing any pressure to be stronger. However, our economy this year is weakening, and unemployment is rising. The RMB could weaken to a position of around 6.95 to 7 against the US dollar.”
Mr. Zhang did not elaborate on the timeframe.
The interview was posted on the website of China Briefing, a monthly magazine run by investment advisory firm Dezan Shira & Associates.
One-year dollar/yuan non-deliverable forwards jumped to a 7.0000 bid after Reuters reported the comments, from 6.9500 previously and 6.9350 at Monday’s close.
Offshore one-year vols jumped to a 10-day high of 10.00 per cent bid from 8.50 per cent previous and Monday’s close of 8.25 per cent.
Spot yuan fell moderately against the dollar on news of Zhang’s remarks, to 6.8417 from around 6.8360 previously and Monday’s finish of 6.8340.
The NDRC has a voice in formulating the exchange rate policy, but the strategy is set by the State Council, the country’s cabinet, and implemented by the central bank.
Many traders in Shanghai said they did not think Mr. Zhang’s remarks indicated any change in government policy. Authorities have repeatedly said they want to keep the currency stable for now, particularly because any weakness could prompt capital outflows during the global financial crisis.
“It appears the market noticed Zhang’s comments, but the global strength of the dollar may also be playing the key role in today’s move,” said a dealer at a major mainland bank in Shenzhen.
However, officials may want to underline the possibility of yuan weakness to deflect US pressure to allow its currency to appreciate. US Secretary of State Hillary Clinton is due to visit Beijing for the first time in her role this week.
Beijing criticised US Treasury Secretary Timothy Geithner last month after he said President Barack Obama believed Beijing was “manipulating” its currency and would push for changes, a stance the Obama administration has since softened.
“As to trade or the exchange rate, perhaps they will be discussed if both sides are interested,” foreign ministry spokeswoman Jiang Yu told reporters on Tuesday, speaking of Clinton’s visit.
She declined further comment.
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