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China's yuan changed little against the dollar on speculation policy makers are keeping the currency trading within a narrow range to aid exporters as recessions take hold in the US, Europe and Japan.
Waning overseas demand has "adversely affected" industrial production and company earnings, President Hu Jintao said on November 21 at the Asia-Pacific Economic Cooperation summit in Lima, Peru. The yuan's reference rate, fixed daily by the People's Bank of China to guide the market, has fluctuated no more than 0.04 percent each day this month.
"The reference rates give the most obvious evidence that the government wants to keep the yuan at around 6.83," said Li Tao, a foreign-exchange trader at the Shenzhen Development Bank Co in Shenzhen.
"A stable currency will help to pull China out of the economic downturn and retain investors' confidence," said the trader.
The yuan closed at 6.8284 per dollar as of 5:30pm in Shanghai, compared with 6.8311 late on November 21, according to the China Foreign Exchange Trade System, Bloomberg News reported.
The currency is allowed to trade by up to 0.5 percent against the dollar either side of the so-called central parity rate, which was set at 6.8304 yesterday.
China's gross domestic product grew 9 percent in the third quarter from a year earlier, the slowest rate in five years, and the government this month announced a 4 trillion yuan (US$586 billion) stimulus plan to spur the economy as exports slump.
Non-deliverable forward contracts show the yuan will weaken 2 percent to 6.97 in six months and 2.6 percent to 7.0135 in 12 months.
Government bonds fell after central bank Deputy Governor Yi Gang said interest rates are at a "relatively appropriate" level, damping speculation policy makers will add to three reductions in borrowing costs since the start of September.
Yield rises
The yield on the 3.68 percent note due September 2018 rose 3 basis points to 3.03 percent, according to the China Interbank Bond Market. "Some investors probably sold bonds to lock in gains because interest rates may stay unchanged until next month," said Qu Qing, a fixed-income analyst at Shenyin Wanguo Research and Consulting Co in Shanghai.
The central bank will monitor changes in the nation's economic situation to determine monetary policy and will use a combination of tools to achieve the best result, Yi said in an interview yesterday.
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