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Spot price of the Yuan spot hits seven-year high against the U.S. dollar

By Catholic Online (NEWS CONSORTIUM)
November 14th, 2012
Catholic Online (www.catholic.org)

The spot price of the yuan against the U.S. dollar rose to 6.2262 this week. It marked a record high since China's foreign exchange reforms seven years ago previously. It was the second consecutive day that the spot price of the yuan against the dollar hit a record high since China launched its foreign exchange reforms in 2005.

LOS ANGELES, CA (Catholic Online) - In the meantime, enterprises and banks had been selling off foreign currencies in anticipation of the yuan's appreciation. According to Ding Zhijie, an economics professor at the University of International Business and Economics, this was in anticipation of the rise in price of currency.

The yuan is allowed to rise or fall by one percent from the central parity rate each trading day, as is allowed in China's foreign exchange spot market,.

The People's Bank of China (PBOC), the country's central bank, set the central parity rate of the yuan against the U.S. dollar at 6.2891 this week, which was the highest since May 9 of this year. The central parity rate of the yuan was 6.2865 on May 9, and even lower at 6.2804, on May 8.

The central parity rate of the yuan broke the level of 6.3 for the first time by hitting 6.2937 on February 10. All told, the strongest point of the yuan for 2012 was 6.2670 on May 2, while the weakest point for this year was 6.3495 on Aug. 16.

China has abandoned a decade-old peg to the U.S. dollar by allowing its currency to fluctuate against a basket of currencies on July 21, 2005.

China's stocks climbed, led by material producers, after the ruling party's once-in-a-decade meeting to choose new leaders drew to a close and the yuan rose to a 19-year high.

"The conclusion of the party congress removes some political uncertainty and will help reduce the equity risk premium," Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai says.

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