China Allows Yuan Appreciate, Can It Do So?

The Chinese yuan appreciated today on the speculation that China will allow its currency to strengthen ahead of the President’s Hu Jintao visit to the US next week.

The analysts have divided opinions on the ability of the yuan to appreciate. Dariusz Kowalczyk, an economist at Credit Agricole CIB, said that “China has managed the currency in such a way that it has depreciated versus the basket, which gives it room to appreciate”. Philip Wee, an economist at DBS Group Holdings Ltd., think that “Europe is still China’s largest trading partner so it is difficult for China to let the yuan appreciate in a weak euro environment”.

USD/CNY declined from 6.6203 to 6.6048 as of 13:12 GMT today.

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