December 03, 2008

Chinese yuan breaks 7 mark against USD

China's currency, the yuan, was set to trade at 6.992 yuan against the US dollar on last Thursday, breaching the 7 yuan mark for the first time since the government un pegged it from the dollar in 2005.

Mr Shen Minggao, an economist at Citigroup in Beijing, said that like many economists, he was not surprised to see the yuan break the 7 yuan mark. He said "It was quite natural.”

Mr Zhuang Jian, a senior economist with the Asian Development Bank mission in China, also believed a weaker U.S. dollar was the most direct factor behind the accelerated appreciation of the yuan.

China ended the currency's peg to the dollar in July 2005, and since then the yuan's reference rate has been set against a currency basket that also includes the euro, yen, won and British pound. The value of Chinese currency stayed above eight to the dollar for many years before the 2005 regime reform. The yuan broke the 8 yuan threshold on May 15, 2006.