The renminbi dipped below 7.0 to the US dollar for the first time in a decade on April 10 as it ended trading in Shanghai 6.9916. China’s currency has gained more than 18% against the dollar since its 2005 revaluation, rising 4% in the first three months of 2008 alone.
The yuan’s climb wasn’t lost on investors as speculative inflows of “hot money” reached US$80 billion in the first quarter, according to Zhu Baoling of the State Information Center. This compares to inflows of US$120 billion during the whole of 2007.
However, US Treasury Secretary Henry Paulson – a regular critic of China’s exchange rate policy – said he was “pleased” with the currency’s appreciation. Paulson reiterated these positive sentiments at a subsequent G7 meeting but this didn’t hold back the G7 group as a whole, which called on China to let its currency appreciate even more quickly.
Remarks made at an IMF meeting in Washington by Zhou Xiaochuan, governor of China’s central bank, indicated that Beijing would contine to resist such pressure.Neverthless, analysts expect the yuan to keep gaining in strength. Some see it reaching 6.10 to the dollar by the end of this year.