China’s yuan strengthened, touching a 17-year high, on speculation the central bank will allow the currency to appreciate as part of measures to contain the fastest inflation in more than two years.
The People’s Bank of China increased the amount of cash lenders are required to set aside as reserves by half a percentage point effective on Thursday, it said on its Web site yesterday, pushing the requirement to a record 20.5 percent for the biggest banks.
China will continue tightening monetary policy for “some time,” central bank Governor Zhou Xiao-chuan (周小川) said on Sunday, a day after the nation reported -inflation that was the quickest since July 2008.
“The country will focus more on non-interest-rate measures, including more reserve-ratio hikes to drain cash domestically and faster currency appreciation to contain imported inflation,” said Dariusz Kowalczyk, a Hong Kong-based economist at Credit Agricole CIB.
He expects at least one more reserve-ratio increase this year to 21 percent.
The yuan climbed 0.06 percent to 6.5287 per US dollar as of the 4:30pm close in Shanghai yesterday, according to the China Foreign Exchange Trade System. The currency touched 6.5276 earlier, the strongest level since the -country unified official and market exchange rates at the end of 1993. In Hong Kong’s offshore market, the yuan gained 0.02 percent to 6.5215.
The People’s Bank of China set the currency’s reference rate 0.01 percent weaker at 6.5310. The fixing was 6.5301 on Friday, the strongest level since July 2005.
Twelve-month non-deliverable forwards declined 0.02 percent to 6.3830 per US dollar, reflecting bets the yuan will strengthen 2.3 percent in a year from the onshore spot rate, according to data compiled by Bloomberg. The contracts reached 6.3615 on April 8, the highest level since the same month in 2008.
China’s economy expanded 9.7 percent from a year earlier in the first quarter and consumer prices rose 5.4 percent last month, the National Bureau of Statistics of China said on Friday. Economists expected growth of 9.4 percent and a 5.2 percent inflation rate, based on median estimates in Bloomberg surveys.
Asia’s largest economy has room to raise interest rates and banks’ reserve-requirement ratios this year as the country faces difficulties achieving the 4 percent goal for consumer price increases this year, the China Securities Journal said in a front-page editorial yesterday. The yuan may continue to gain appropriately, the editorial said.
The nation’s third interest-rate increase this year may come as soon as next month and policy makers may consider allowing faster appreciation of the yuan to reduce the cost of imported commodities such as oil, according to Societe Generale SA. A flexible yuan will become a very effective tool for curbing inflation, the China Business News reported yesterday, citing former US Treasury secretary Henry Paulson.
France cannot afford to ignore the third credit-rating reduction in less than a year, French Minister of Finance Roland Lescure said. “Three agencies have downgraded us and we can’t ignore this cloud,” he told Franceinfo on Saturday, speaking just hours after S&P lowered his country’s credit rating to “A+” from “AA-” in an unscheduled move. “Fundamentally, it’s an additional cloud to a weather forecast that was already pretty gray. It’s a call for lucidity and responsibility,” he said, adding that this is “a call to be serious.” The credit assessor’s move means France has lost its double-A rating at two of the
Jensen Huang (黃仁勳), founder and CEO of US-based artificial intelligence chip designer Nvidia Corp and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) on Friday celebrated the first Nvidia Blackwell wafer produced on US soil. Huang visited TSMC’s advanced wafer fab in the US state of Arizona and joined the Taiwanese chipmaker’s executives to witness the efforts to “build the infrastructure that powers the world’s AI factories, right here in America,” Nvidia said in a statement. At the event, Huang joined Y.L. Wang (王英郎), vice president of operations at TSMC, in signing their names on the Blackwell wafer to
AI BOOST: Although Taiwan’s reliance on Chinese rare earth elements is limited, it could face indirect impacts from supply issues and price volatility, an economist said DBS Bank Ltd (星展銀行) has sharply raised its forecast for Taiwan’s economic growth this year to 5.6 percent, citing stronger-than-expected exports and investment linked to artificial intelligence (AI), as it said that the current momentum could peak soon. The acceleration of the global AI race has fueled a surge in Taiwan’s AI-related capital spending and exports of information and communications technology (ICT) products, which have been key drivers of growth this year. “We have revised our GDP forecast for Taiwan upward to 5.6 percent from 4 percent, an upgrade that mainly reflects stronger-than-expected AI-related exports and investment in the third
RARE EARTHS: The call between the US Treasury Secretary and his Chinese counterpart came as Washington sought to rally G7 partners in response to China’s export controls China and the US on Saturday agreed to conduct another round of trade negotiations in the coming week, as the world’s two biggest economies seek to avoid another damaging tit-for-tat tariff battle. Beijing last week announced sweeping controls on the critical rare earths industry, prompting US President Donald Trump to threaten 100 percent tariffs on imports from China in retaliation. Trump had also threatened to cancel his expected meeting with Chinese President Xi Jinping (習近平) in South Korea later this month on the sidelines of the APEC summit. In the latest indication of efforts to resolve their dispute, Chinese state media reported that
RSS