China widens renminbi band and lifts rates
China widens renminbi band and lifts rates
By Mure Dickie in Beijing
Copyright The Financial Times Limited 2007
Published: May 18 2007 12:09 | Last updated: May 18 2007 12:48
China’s central bank on Friday widened its daily trading band against the dollar for the renminbi to 0.5 per cent from 0.3 per cent, while raising interest rates and banks’ reserve requirements.
The widening of the trading band is sure to fuel expectations that China will allow the renminbi to rise at a faster rate as its politically sensitive trade surplus soars.
However, People’s Bank of China insisted the move was just a further step in its gradual reform of its currency exchange regime and that it should not be seen as prelude to a revaluation.
”(The widening) is a constructive institutional step, and certainly does not signify that there will be great volatility in the renminbi exchange rate, even less does it signify that there will be a large appreciation,” the central bank said.
The move comes shortly ahead of a meeting of the Sino-US Strategic Economic Dialogue established last year by Hank Paulson, US Treasury secretary, who recently called on Beijing to accelerate moves toward a market-determined exchange rate. China’s critics have long accused it of deliberately keeping the currency undervalued in order to support exports.
US critics have noted that the appreciation of the renminbi against the dollar has slowed in recent months, to an annual rate of about 2 per cent.
The People’s Bank separately announced that it would raise both interest rates and banks’ required reserves from Saturday. The one-year lending rate would rise by 0.18 of a percentage point to 6.57 per cent, and the one-year deposit rate by 0.27 of a percentage point to 3.06 per cent.
The rate rise was the latest in a series amid concerns that sectors of China’s rapidly growing economy are over-heating and that a bubble is forming in domestic stock markets.
By Mure Dickie in Beijing
Copyright The Financial Times Limited 2007
Published: May 18 2007 12:09 | Last updated: May 18 2007 12:48
China’s central bank on Friday widened its daily trading band against the dollar for the renminbi to 0.5 per cent from 0.3 per cent, while raising interest rates and banks’ reserve requirements.
The widening of the trading band is sure to fuel expectations that China will allow the renminbi to rise at a faster rate as its politically sensitive trade surplus soars.
However, People’s Bank of China insisted the move was just a further step in its gradual reform of its currency exchange regime and that it should not be seen as prelude to a revaluation.
”(The widening) is a constructive institutional step, and certainly does not signify that there will be great volatility in the renminbi exchange rate, even less does it signify that there will be a large appreciation,” the central bank said.
The move comes shortly ahead of a meeting of the Sino-US Strategic Economic Dialogue established last year by Hank Paulson, US Treasury secretary, who recently called on Beijing to accelerate moves toward a market-determined exchange rate. China’s critics have long accused it of deliberately keeping the currency undervalued in order to support exports.
US critics have noted that the appreciation of the renminbi against the dollar has slowed in recent months, to an annual rate of about 2 per cent.
The People’s Bank separately announced that it would raise both interest rates and banks’ required reserves from Saturday. The one-year lending rate would rise by 0.18 of a percentage point to 6.57 per cent, and the one-year deposit rate by 0.27 of a percentage point to 3.06 per cent.
The rate rise was the latest in a series amid concerns that sectors of China’s rapidly growing economy are over-heating and that a bubble is forming in domestic stock markets.
posted by Carlos T Mock @ 8:10 AM
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