Dollar lower as yuan hits five-year high
Tuesday, 22 June 2010
TOKYO, June 21 (AFP): The dollar lost ground in Asia Monday after China's yuan exchange rate hit its highest level against the dollar in five years following a weekend announcement of greater flexibility, analysts said.
The dollar stood at 90.65 yen in Tokyo afternoon trade, slightly down from 90.71 yen in New York late Friday before Beijing's announcement.
The euro gained to 1.2456 dollars from 1.2385 and to 112.91 yen from 112.36 yen.
The dollar faced moderate selling pressure after the yuan surged to 6.8089 to the dollar in mid-afternoon trade on China's main foreign exchange trading market, its highest since July 2005.
"The dollar tends to fall if China takes action for a stronger yuan," Hikdeaki Inoue, chief manager at forex trading of Mitsubishi UFJ Trust and Banking.
"But the yuan is still trading within expectations, and a sharp fall in the dollar alone among major currencies is unlikely," Inoue said. "We will continue matching the yuan's move ahead of the G20 summit this week."
China's central bank said Saturday it would "strengthen the flexibility" of the yuan exchange rate, which some analysts saw as a sign Beijing was ready to adjust the dollar peg in place for two years and allow the currency to rise.
However, the bank moved Sunday to douse expectations, saying there would be no "large swings" in the currency and no one-off adjustment.
China has effectively pegged the yuan at about 6.8 to the dollar since mid- 2008 to prop up exporters during the world financial crisis.
But it has come under mounting pressure ahead of next weekend's Group of 20 summit in Toronto to allow the currency to strengthen.
The issue has been a constant irritant in US-China ties, with American lawmakers charging Beijing deliberately undervalues the yuan, unfairly boosting Chinese manufacturers and costing US jobs.
Earlier in the day, trading was calm after China kept the yuan exchange rate unchanged at 6.8275 to the dollar, prompting speculation among investors that China was "unenthusiastic" about allowing the yuan to rise.
Credit Suisse said in a report that China had not suggested any radical change in its currency policy.
"The yuan's appreciation against the dollar will be limited for the time being," it said, adding it expected the rise would be about two per cent.
The market is also waiting for a two-day meeting of US Federal Reserve policymakers from Tuesday.
The dollar stood at 90.65 yen in Tokyo afternoon trade, slightly down from 90.71 yen in New York late Friday before Beijing's announcement.
The euro gained to 1.2456 dollars from 1.2385 and to 112.91 yen from 112.36 yen.
The dollar faced moderate selling pressure after the yuan surged to 6.8089 to the dollar in mid-afternoon trade on China's main foreign exchange trading market, its highest since July 2005.
"The dollar tends to fall if China takes action for a stronger yuan," Hikdeaki Inoue, chief manager at forex trading of Mitsubishi UFJ Trust and Banking.
"But the yuan is still trading within expectations, and a sharp fall in the dollar alone among major currencies is unlikely," Inoue said. "We will continue matching the yuan's move ahead of the G20 summit this week."
China's central bank said Saturday it would "strengthen the flexibility" of the yuan exchange rate, which some analysts saw as a sign Beijing was ready to adjust the dollar peg in place for two years and allow the currency to rise.
However, the bank moved Sunday to douse expectations, saying there would be no "large swings" in the currency and no one-off adjustment.
China has effectively pegged the yuan at about 6.8 to the dollar since mid- 2008 to prop up exporters during the world financial crisis.
But it has come under mounting pressure ahead of next weekend's Group of 20 summit in Toronto to allow the currency to strengthen.
The issue has been a constant irritant in US-China ties, with American lawmakers charging Beijing deliberately undervalues the yuan, unfairly boosting Chinese manufacturers and costing US jobs.
Earlier in the day, trading was calm after China kept the yuan exchange rate unchanged at 6.8275 to the dollar, prompting speculation among investors that China was "unenthusiastic" about allowing the yuan to rise.
Credit Suisse said in a report that China had not suggested any radical change in its currency policy.
"The yuan's appreciation against the dollar will be limited for the time being," it said, adding it expected the rise would be about two per cent.
The market is also waiting for a two-day meeting of US Federal Reserve policymakers from Tuesday.