Thresh­old of 7 yuan to dol­lar not cru­cial

China Daily (Hong Kong) - - FRONT PAGE - By XIN ZHIMING xinzhim­ing@chi­

The yuan’s so-called psy­cho­log­i­cal thresh­old of 7 to the US dol­lar is not so im­por­tant for the Chi­nese econ­omy, an­a­lysts said on Thurs­day, af­ter the cen­tral bank re­jected an “ir­re­spon­si­ble” me­dia re­port that the yuan had fallen be­low that level in Wed­nes­day’s trad­ing. The yuan traded be­tween 6.95 and 6.9666 per dol­lar on Wed­nes­day, the Peo­ple’s Bank of China, the cen­tral bank, said on its mi­croblog on Wed­nes­day night. “But some ir­re­spon­si­ble me­dia re­ports said that the on­shore rate of the yuan broke the psy­cho­log­i­cal thresh­old of 7.0,” the cen­tral bank said.

“Tech­ni­cally, the me­dia re­port that the yuan had bro­ken that level is wrong,” said Xiao Lisheng, an econ­o­mist at the In­sti­tute of World Eco­nomics and Pol­i­tics of the Chi­nese Acad­emy of So­cial Sciences. “The re­port sent a mis­lead­ing sig­nal to in­vestors and the public in gen­eral that the yuan was de­pre­ci­at­ing at a faster pace.”

The 7 yuan mark is not so cru­cial and in­vestors should not worry about the psy­cho­log­i­cal line, said Liang Haim­ing, chief econ­o­mist of China Silk Road iVal­ley Re­search In­sti­tute.

While it de­pre­ci­ates ver­sus the dol­lar, the yuan has risen against other cur­ren­cies, a di­ver­gence that will ex­ist for some time, said Liang. “The fall­ing yuan is caused not by ma­jor changes in China’s eco­nomic fun­da­men­tals, but by the strong ap­pre­ci­a­tion of the dol­lar.”

The cen­tral par­ity rate of the yuan, the bench­mark ref­er­ence rate set by the cen­tral bank, weak­ened by 2 ba­sis points, or 0.02 per­cent, to 6.9497 against the US dol­lar on Thurs­day.

The same day, China ad­justed the weight­ing of the China For­eign Ex­change Trade Sys­tem cur­rency bas­ket, which is used to mea­sure the level of the yuan against a num­ber of ma­jor cur­ren­cies, and in­cluded 11 new cur­ren­cies.

Af­ter the ad­just­ment, the weight­ing of the dol­lar fell to 22.4 per­cent from 26.4 per­cent. The euro dropped to 16.3 from 21.4 per­cent, and the Ja­panese yen to 11.5 from 14.7 per­cent.

The ad­just­ment in­creases the rep­re­sen­ta­tive na­ture of the bas­ket, the China For­eign Ex­change Trade Cen­ter said.

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