Analysts expects Yuan to appreciate against US dollar

21 Jan '11

2 min read

By the end of 2010, China's foreign exchange reserves amounted to US $2.8473 trillion, up 18.7 percent year on year, while the trade surplus touched US $183.1 billion, China's foreign direct investment reached US $91.7 billion in the first 11 months of 2010.

The Yuan appreciation against the dollar reached 3 percent in 2010. The central parity of Yuan against the US dollar broke a new high since the exchange reform and closed at 6.6128 Yuan per dollar on January 12.

The year has just begun; major organizations collectively expect that the Yuan will continue to appreciate in 2011 against the US dollar.

The mechanism of the Yuan closely pegging to the dollar no longer exists since the financial crisis. China resumed the exchange reform that was started in 2005; the Yuan surged all the way, rising from 6.8275 Yuan per dollar on June 19, 2010 to 6.6128 Yuan per dollar on January 12, 2011.

The market has almost no objection to the pace of Yuan appreciation. UBS Securities expects that the Yuan will rise 6 percent in 2011; the dollar-Yuan exchange rate will reach 6.2 Yuan per dollar by the end of 2011, being driven by international pressures.

JP Morgan expects that the Yuan against the US dollar will remain at 6.3 Yuan per dollar by the end of 2011; the pace of appreciation may accelerate.

China International Capital Corporation Limited (CICC) expects that the real effective exchange rate of Yuan will rise by 5 percent in the next 12 months.

Chief Asia-Pacific economist of Goldman Sachs in Hong Kong, Michael Buchanan says that the Yuan against the US dollar will appreciate 5.8 percent by the end of 2011.

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