Yuan hits post-revaluation high
22 August 2006
The yuan reached a new high Monday on the back of expectations last Friday's interest rate rise will attract more foreign funds to China, the Wall Street Journal reported. The dollar closed at RMB7.9656 on the over-the-counter market (OTC), down from RMB7.9745 Friday, having gone as low as RMB7.9700 during trading, its lowest OTC level since the revaluation last year. Meanwhile, bond prices dropped sharply in response to forecasts another interest rate rise is possible. The People's Bank of China raised the benchmark one-year bank-lending rate by 0.27 percentage points to 6.12%, following an identical increase in April. Rates paid on one-year deposits rose by the same amount, to 2.52%, the first deposit-rate increase since 2004. Stock prices also took a hit as a result of the interest rate hike, with the Shanghai Composite Index dropping 2% as the market opened. However, it recovered to post a 0.2% gain.