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Economists delivered mixed forecasts on the value of the yuan during the second half, as China's currency closed out a dismal week and continued its downturn in yesterday's trading.
The yuan fell 0.06 percent to 6.8515 to the US dollar yesterday on the China Foreign Exchange Trading System, compared with Friday's figure. The People's Bank of China set yesterday's central parity rate at 6.8471.
Last week, the Chinese currency dropped in value from 6.8189 to 6.8425 to the greenback after the central government said it would pursue an economic policy that balances stable growth with efforts to curb inflation.
Market watchers viewed the move to the balanced approach, replacing the previous tight monetary policy employed to tame inflation, as a pro-growth posture.
Economists were divided, however, on how the policy would play out.
"The yuan's appreciation may slow in the second half for the benefit of exporters, which have been hit hard by the yuan's appreciation amid world economic uncertainties," said Lu Zhengwei, chief economist at Industrial Bank.
He expects the yuan to end the year between 6.65 and 6.75 to the US dollar.
Standard Chartered Bank revised its yuan forecast to 6.7 against the dollar for the end of this quarter from it previous 6.65. The yuan is forecast to rise to 6.6 against the dollar by the end of the year, compared with a previous forecast of 6.55.
Optimistic outlook
At least one other economist has a different view.
"We do not think the latest slowdown in the USD-CNY value implies the reverse of the yuan's appreciation trend," Tommy Xie, an OCBC Bank economist, told Shanghai Daily yesterday.
"We still consider the possibility of the yuan's appreciation against the basket value as high in the second half due to imbalanced international payments and receipts. That may translate into the yuan's appreciation against the US dollar in the spot market, provided that the dollar does not rebound sharply in the global market.
"Despite the recent tumble of the yuan, we're holding to our forecast for the USD-CNY to be at 6.6 by yearend," he said.
Xie said he expects the volatility of the relationship between the two currencies to increase.
China's interest rates are well above those in the United States, and the yuan is gradually appreciating against the dollar to help ease inflationary pressures. The growth in value has turned the currency into a safe haven for international investors.
China's foreign exchange reserves rose 35.7 percent to US$1.8 trillion at the end of June. Forex reserves added US$280.6 billion in the first half, up US$14.3 billion year on year.
The yuan has risen about 18 percent since China uncoupled the currency from the greenback in July 2005 and fixed it to a basket of currencies.
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