China Business

Nov 30, 2005

US dollar falls below 8 yuan

BEIJING - The number of Chinese yuan purchased by one US dollar fell to 7.9997 on November 25, dropping below 8 yuan per dollar for the first time since China's foreign exchange rate reforms of this summer, sources at the Bank of China said.

According to recent data, the exchange rate of the yuan against the US dollar closed at 8.083 yuan on November 23, then rebounded slightly but closed again at 8.0805 yuan on November

24, a record high. On November 25, the exchange rate opened at 8.081 yuan and closed at 8.0815 yuan. Before then, the rate narrowly fluctuated around 8.0870 yuan.

Experts attribute the gradual rise of the yuan exchange rate against the US dollar to two factors:

1. The central bank has published documents on improving the "market maker" system, which has delegated the right to decide foreign exchange market prices to commercial banks. Under these circumstances, the purchase price of the yuan against US dollar in cash offered by commercial banks will ultimately reflect the actual market demand for the yuan.

2. Rapid increases in China's trade surplus have imposed a certain appreciation pressure on the yuan.

(Asia Pulse/XIC)

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