China's currency reaches new high against dollar (Roundup)

Oct 11, 2010, 16:36 GMT

Beijing - China's currency hit a record high Monday as the central parity rate of the yuan was set at 6.6732 per dollar, according to official data.

Monday's central parity rate beat the previous record of 6.6830 on October 8.

The yuan has picked up strength against the dollar and seen increased volatility in trading since China's central bank announced it would increase exchange rate flexibility on June 19.

Based on Monday's rate, the Chinese currency has strengthened against the dollar by about 2.26 percent from the rate of 6.8275 per dollar set before the bank's pledge to increase flexibility.

On China's foreign exchange spot market, the yuan can rise or fall 0.5 per cent from the parity rate during trading each day.

China will continue to reform the mechanism of its currency exchange rate to improve flexibility, but will do so in a gradual way, Zhou Xiaochuan, governor of the central bank, said Sunday.

He said Westerners prefer Western medication methods that are quick but drastic, while Chinese people prefer traditional medication that is slower and needs time for different elements to take effect.

Managing China's currency issue is a 'complicated art,' which must consider domestic inflation, the unemployment rate, gross domestic product growth, the balance of payments and other factors, he said.

Exchange rates dominated talks of finance ministers this weekend at the annual meetings of the International Monetary Fund (IMF) and World Bank.

The US has long accused China of artificially keeping down the value of its yuan currency, giving it an unfair trade advantage. China, which the IMF projects will grow at a rate of more than 10 per cent this year, sees the weak yuan as beneficial to its export-driven economy.

The dispute has come to a head in the last few weeks as the US and Europe desperately look for ways to strengthen growth in their economies, which have sputtered out of last year's global recession.

The US House of Representatives approved legislation allowing President Barack Obama to impose import tariffs on China if the yuan does not rise significantly. The Senate is mulling the same bill, and Obama's administration has suggested it is open to the idea.

The Wall Street Journal on Monday quoted a US official as saying Washington would continue to place pressure on China despite concern within the international community.

The United States was happy that the theme was discussed at last week's meetings and that Beijing appeared to be reacting, however additional pressure was needed, the unnamed official said.

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