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Fast rise in yuan `unlikely'

Currency movements * Presidential adviser Wu Rong-i said the yuan was unlikely to appreciate quickly, given China's planned economy. * Wu expects the Chinese currency to continue to rise gradually. * The NT dollar's movement would be mainly influenced by the Japanese yen and the South Korean won, he said. * Meanwhile, China's currency posted its biggest two-day drop against the US dollar since a revaluation in July.

The Chinese yuan is unlikely to undergo a strong appreciation in the short term, and the value of the local currency will hover mainly around the values of the Japanese yen and South Korean won, an economist said yesterday.

Wu Rong-i (吳榮義), an adviser to President Chen Shui-bian (陳水扁), made the forecast at a seminar sponsored by the Taiwan Institute of Economic Research (台經院) on the development prospects of Taiwan's high-speed railway system, construction of which is scheduled to be completed in October.

According to Wu, the New Taiwan dollar's value will also rise on a stronger Chinese yuan if China yields to US pressure and allows its currency to be freely traded on the market.

But he predicted that a noticeable appreciation in the value of the yuan would be impossible in the near future as a result of China's state-planned economy.

In the near term, the Chinese unit will continue to move up gradually and the local currency's value will be mainly influenced by fluctuations in the Japanese yen and South Korean won, he said.

China's yuan yesterday posted its biggest two-day drop against the US dollar since a revaluation in July, adding to signs the Chinese central bank is allowing wider swings in the currency.

The 0.18 percent slide in the past two days followed declines in Asian currencies on speculation the US Federal Reserve would continue to raise interest rates. The Chinese central bank has used a basket of currencies to manage its exchange rate since ending a peg to the dollar in July and is seeking more flexibility for the exchange rate.

The yuan closed at 8.0185 against the US dollar at 5:30pm, according to the Web site of the China Foreign Exchange Trade System in Shanghai.

The US trade deficit with China ballooned to over US$200 billion last year. US President George W. Bush on April 10 said he wanted Chinese President Hu Jintao (胡錦濤) to explain how the government would allow its currency to strengthen during a visit to Washington on April 20.
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