Yuan’s Rise May Be Not Fast, but Is Expected

The Chinese yuan may gradually rise as the China’s government is likely to let the nation’s currency to appreciate in order to fight the inflation, but the sharp increase because of the foreign pressure isn’t expected.

The 17 percent jump of import prices in March from the previous year caused the first balance trade deficit in China since 2004, suggesting that the government should step in to curb inflation, possibly by helping the yuan to go up. The fast surge of the currency’s value isn’t probable even though the danger of being accused as the currency manipulator is weighting heavily on the Chinese government’s decisions in the fiscal politic.

The President Hu Jintao stated that in the decisions regarding the exchange-rate policy China is driven by the necessity to defend “its own economic and social development needs”. Analysts estimate the possible increase of the yuan price by the end of this year in the range from 3.1 percent to 6.62 per U.S. dollar.

USD/CNY traded near 6.8261 as of 16:10 GMT today, little changing from its opening price of 6.8262. EUR/CNY traded at about 9.2703 down from its opening level of 9.2783.

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