The People’s Bank of China released a monetary policy report for the fourth quarter of 2007 today. In this report, Chinese monetary authorities noted that the yuan’s appreciation really helps in fighting the national inflation.
Today was the fifth straight day when the Chinese yuan grew against the U.S. dollar and other major Forex currencies after the People’s Bank of China introduced its new anti-inflation policy.
The Chinese yuan continued its triumph this week and was set at a new record high value against the U.S. dollar today at the Shanghai Foreign Currency Trade session.
With almost every day on Forex being bullish for the Chinese yuan, today it continued its appreciation against other major currencies and particularly against the U.S. dollar, which is now in a bearish trend after the latest Fed’s rate cut.
According to the China Foreign Exchange Trading System, the dollar/yuan central parity rate was set at its record low since the scrap of peg to dollar - 7.2775; down from 7.2996 previous recent record level.
The United States Treasury International Capital report showed that China has been selling its Treasuries for a third month in a row in October 2007, which may signal for the start of the funds diversification.
U.S. Treasury Secretary Henry Paulson is going to visit China again in order to motivate the government to increase the pace of the change in which yuan would appreciate against U.S. dollar and other world currencies.
Fukushiro Nukaga, Japanese Minister of Finance, joined the “league” of European and U.S. officials in their endeavor to convince Chinese government to take more definite actions aimed towards yuan’s free exchange rate.
Li Yang, an ex-adviser of the People’s Bank of China, suggests a great care in handling any changes to the country’s foreign currency reserves (world’s largest), that are currently composed mainly of U.S. dollars. By the Li’s words, it’s not reasonable to change the vast amount of current reserves, but the new income that goes to the reserves can be exchanged to other currencies.
Chinese yuan will definitely see a some kind of revaluation against dollar and other major currencies soon. Jean-Claude Trichet spoke today about his latest endeavor to convince China government to make confident steps towards stronger yuan policy. From his words the Chinese central bank understands the concerns of their trade partners and the steps will be done eventually to make yuan less depreciated.