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Chinese Yuan Rose on Dollar’s Decline

May 19, 2008 at 10:17 by Andriy Moraru

Chinese yuanThe Chinese yuan continued its record breaking growth against the U.S. dollar after a month-long pause today and rose to a new maximum level since the scrapping of the yuan-dollar peg in 2005.

China’s currency appreciated today as the U. S. Treasury Undersecretary David McCormick urged country’s authorities to further strengthen the yuan at a fast pace, while the U.S. dollar remained weak on Forex after a major downfall last Friday.

While it’s mostly certain that the yuan is going directly up against the dollar (and against euro and yen too), the question only remains as to how fast this appreciation will progress? Strong fundamentals, including tremendous current account and trade balance surplus, suggest for a safe and fast transfer to a more valued currency.

The  U. S. dollar index, which measures the strength of dollar compared to dollar’s 6 most-traded counterparts, had its biggest daily drop last Friday. Asian currencies, including yuan, were among the most benefiting instruments during that decline.

The yuan rose today from its Friday close rate 6.9890 to 6.9820 as of 8:08 GMT in Shanghai. Currency strategists expect USD/CNY rate to devalue to at least 6.7 by the year’s end.

If you have any questions, comments, or opinions regarding the Chinese Yuan, feel free to post them using the commentary form below.

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