The Chinese yuan rose today to its new highest level against the dollar as the Forex traders reacted on the U.S. bank-rescue plan of dumping $700 billion into the economy that will hurt some important macroeconomic statistics and increase the supply of dollars.
Yesterday dollar showed an exceptionally fast drop against the major currencies on the Forex market. In its reaction to this fall, Peoples Bank of China set its yuan reference rate to the maximum since 2005, when the peg to dollar was abandoned.
Current dollars weakness increases the attractiveness of the yuan at the moment. But its very unlikely that the Chinas central bank will allow any significant growth against the dollar. The recent measures taken by the Chinese government show that the stronger yuan did hurt the economy and while the price growth is stable, the yuans rate should also be stable.
The Chinese yuan is traded in the strict limit of the central banks boundaries, which are set to 0.5 percent in the either side of the reference rate. Today it was at the record low 6.8009 yuan per dollar.
USD/CNY rate fell from 6.8300 (yesterdays close) to to 6.8239 as of 7:21 GMT today, reaching the daily low of 6.8009, according to the China Foreign Exchange Trade System.
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