May 19th, 2007, 00:00
EXCHANGE RATES
China's currency loosens its stays - The Nation
Trade competitors hail widening of yuan's trading limits from 0.3% to 0.5% of closure
China widened the daily trading limit for the yuan against the US dollar yesterday, with effect from today. The move has been warmly welcomed by Thailand's Finance Minister Chalongphob Sussangkarn and Thai exporters.
The Chinese central bank said the band in which the yuan was allowed to fluctuate against the dollar each day will be widened from 0.3 per cent to 0.5 per cent above or below the previous day's closing value. The wider band will allow the currency to appreciate faster ahead of what are expected to be contentious talks in Washington on China's soaring trade surplus.
American officials hope a stronger yuan will narrow the multibillion-dollar US trade deficit with China by making Chinese goods more expensive. The announcement came ahead of a meeting starting on Wednesday in Washington of a "strategic economic dialogue" between senior US and Chinese officials to address complaints about China's trade gap, product piracy and other issues.
Chalongphob said late yesterday that he supported China's widening of the yuan's trading band, saying it would help to drive all Asian currencies in the same direction. Only some currencies have been appreciating against the dollar; now many more Asian currencies will do so, Chalongphob told reporters. "This decision will allow currencies in the Asean+3 region [which encompasses 10-member Asean, China, South Korea and Japan] to move in the same direction. It shows that the foreign-exchange issue is open for discussion," he said.
Once currencies are moving in the same direction, the export competitiveness of countries will be less affected by foreign-exchange movements, and the Bank of Thailand will continue to monitor foreign-exchange markets and to carefully manage inflows and outflows, he said.
The weak yuan has kept Chinese goods cheap, putting the burden on the competitiveness of other countries, including Thailand, which is suffering from the fast appreciation of the baht against the US dollar, particularly in the textiles and electronics sectors. Thai exporters thus welcomed the Chinese move, which would give the Chinese central bank the option of letting the yuan rise further each day, although authorities could still intervene to prevent it from rising to its limit.
"This is what the entire world has been expecting, for the yuan should have been stronger due to a huge trade surplus and robust economic growth," said Kartchai Jamkajornkeiat, vice president of the Thai Garment-Manufacturers' Association.
He hoped that following the move the yuan would quickly appreciate to its real value to create fair competition in world trade, particularly in the textiles and garments sector, where Thailand's competitiveness has been severely hurt by cheap Chinese products.
Pornsilp Pacharintanakul, secretary-general of the Board of Trade, said the stronger the yuan was, the better for the Thai economy. "For a year the baht has appreciated 15-17 per cent against the greenback, while the yuan's appreciation has been only 5 per cent. The stronger yuan will increase our competitiveness," he said.
Suchat Chantaranakaracha, chairman of the Thai National Shippers' Council, reckoned that in the short term the baht could appreciate further in line with the stronger yuan, though that depended on the financial authorities addressing the appreciation, probably by interest-rate cuts.
According to Dow Jones Newswire, the baht strengthened against the US dollar in after-hours onshore trade to Bt34.54 from Bt34.61 at the close of regular hours yesterday, after the news that the Chinese central bank was widening the trading band of the yuan. However, the US unit later moved back up to Bt34.56 amid suspected dollar-buying by the Bank of Thailand.
Critics of Beijing's trade policies say it keeps the yuan undervalued, giving its exporters an unfair price advantage and adding to its swelling trade surplus, which last year grew to US$232.5 billion.
Beijing revalued the yuan against the dollar by 2.1 per cent in July 2005 and has let it rise another 5.3 per cent since then in tightly controlled trading.
But Washington was pressing for a faster rise, and some American lawmakers called for punitive action against China if it failed to take faster action.
The central bank's announcement made no mention of the trade disputes. It said Beijing would "keep the exchange rate basically stable" in order to "safeguard the stability of the overall economy".
Petchanet Pratruangkrai, Wichit Chaitrong, The Nation"
Little joy for US tourists though.
China's currency loosens its stays - The Nation
Trade competitors hail widening of yuan's trading limits from 0.3% to 0.5% of closure
China widened the daily trading limit for the yuan against the US dollar yesterday, with effect from today. The move has been warmly welcomed by Thailand's Finance Minister Chalongphob Sussangkarn and Thai exporters.
The Chinese central bank said the band in which the yuan was allowed to fluctuate against the dollar each day will be widened from 0.3 per cent to 0.5 per cent above or below the previous day's closing value. The wider band will allow the currency to appreciate faster ahead of what are expected to be contentious talks in Washington on China's soaring trade surplus.
American officials hope a stronger yuan will narrow the multibillion-dollar US trade deficit with China by making Chinese goods more expensive. The announcement came ahead of a meeting starting on Wednesday in Washington of a "strategic economic dialogue" between senior US and Chinese officials to address complaints about China's trade gap, product piracy and other issues.
Chalongphob said late yesterday that he supported China's widening of the yuan's trading band, saying it would help to drive all Asian currencies in the same direction. Only some currencies have been appreciating against the dollar; now many more Asian currencies will do so, Chalongphob told reporters. "This decision will allow currencies in the Asean+3 region [which encompasses 10-member Asean, China, South Korea and Japan] to move in the same direction. It shows that the foreign-exchange issue is open for discussion," he said.
Once currencies are moving in the same direction, the export competitiveness of countries will be less affected by foreign-exchange movements, and the Bank of Thailand will continue to monitor foreign-exchange markets and to carefully manage inflows and outflows, he said.
The weak yuan has kept Chinese goods cheap, putting the burden on the competitiveness of other countries, including Thailand, which is suffering from the fast appreciation of the baht against the US dollar, particularly in the textiles and electronics sectors. Thai exporters thus welcomed the Chinese move, which would give the Chinese central bank the option of letting the yuan rise further each day, although authorities could still intervene to prevent it from rising to its limit.
"This is what the entire world has been expecting, for the yuan should have been stronger due to a huge trade surplus and robust economic growth," said Kartchai Jamkajornkeiat, vice president of the Thai Garment-Manufacturers' Association.
He hoped that following the move the yuan would quickly appreciate to its real value to create fair competition in world trade, particularly in the textiles and garments sector, where Thailand's competitiveness has been severely hurt by cheap Chinese products.
Pornsilp Pacharintanakul, secretary-general of the Board of Trade, said the stronger the yuan was, the better for the Thai economy. "For a year the baht has appreciated 15-17 per cent against the greenback, while the yuan's appreciation has been only 5 per cent. The stronger yuan will increase our competitiveness," he said.
Suchat Chantaranakaracha, chairman of the Thai National Shippers' Council, reckoned that in the short term the baht could appreciate further in line with the stronger yuan, though that depended on the financial authorities addressing the appreciation, probably by interest-rate cuts.
According to Dow Jones Newswire, the baht strengthened against the US dollar in after-hours onshore trade to Bt34.54 from Bt34.61 at the close of regular hours yesterday, after the news that the Chinese central bank was widening the trading band of the yuan. However, the US unit later moved back up to Bt34.56 amid suspected dollar-buying by the Bank of Thailand.
Critics of Beijing's trade policies say it keeps the yuan undervalued, giving its exporters an unfair price advantage and adding to its swelling trade surplus, which last year grew to US$232.5 billion.
Beijing revalued the yuan against the dollar by 2.1 per cent in July 2005 and has let it rise another 5.3 per cent since then in tightly controlled trading.
But Washington was pressing for a faster rise, and some American lawmakers called for punitive action against China if it failed to take faster action.
The central bank's announcement made no mention of the trade disputes. It said Beijing would "keep the exchange rate basically stable" in order to "safeguard the stability of the overall economy".
Petchanet Pratruangkrai, Wichit Chaitrong, The Nation"
Little joy for US tourists though.