Yuan reaches record high against the US dollar
Further appreciation predicted, which would fuel inflation on the mainland and in Hong Kong
The yuan reached a record high yesterday as the central bank fixed its midpoint against the US dollar at the strongest level ever.
The People's Bank of China set the midpoint at 6.2506 yuan per US dollar - up from the fixing of 6.2578 on Thursday - ahead of a visit by US Secretary of State John Kerry to Asia. The yuan jumped to 79.775 Hong Kong dollars per 100 yuan, just near the record of 79.729 on Wednesday.
China often allows the yuan to appreciate faster before visits by officials from Western countries, who usually push for exchange rate liberalisation.
However, the yuan is set to strengthen this year. Inflows of capital are expected to generate higher demand for the yuan than last year as the mainland economy recovers, economists said.
"In 2013 we'll see greater risks of capital inflows to China, rather than two-way movements in the yuan exchange rate or capital outflows as last year," said Chang Jian, an economist at Barclays Capital. Barclays expects the yuan to strengthen 2 per cent against the greenback this year, after considering China's intention to protect exporters in the still shaky economic recovery.
