YUAN HITS NEW HIGH AGAINST U.S. DOLLAR

The central parity rate for yuan against the U.S. dollar rose to new high on Monday, the first trading day when the daily floating band for the spot rate in the interbank foreign exchange market is expanded.

The central parity rate for the yuan, also known as the Renminbi (RMB), reached 7.6652 to one U.S. dollar on Monday, gaining 152 basis points from Friday's reference rate of 7.6804 to the hard currency.

The yuan has climbed 1,435 basis points from 7.8087 yuan to one U.S. dollar posted on the last business day of 2006.

On Friday, the People's Bank of China, the country's central bank, announced a widening of the floating band of the yuan against the U.S. dollar for daily spot trading on the interbank market from 0.3 per cent to 0.5 per cent as of May 21.

The new move will be conducive to growth of forex market, making the yuan more flexible, enhancing the strength against risks of enterprises and financial institutions and sharpening their competitive edge, said the central bank.

"The 0.5 per cent floating band is reasonable as exchange rates like the U.S. dollar against yen, or Euro against the U.S. dollar would fluctuate within this limit most of the time," said Lin Chaohui, senior researcher with Guotai Junan Securities.

"The higher flexibility indicated that the fluctuations of yuan will rely more on market forces. It's a good step forward in the correct direction," said Zuo Xiaolei, an analyst with Galaxy Securities.

The central parity rate of yuan against the U.S. dollar has accumulatively appreciated by about 5.5 per cent since July 21, 2005, when China scrapped the yuan-dollar peg amid drastic currency reforms.