China’s Yuan Recovers From Low
BEIJING (AP) _ China’s currency recovered Thursday after hitting a 28-month closing low that sparked speculation the government was set to abandon the yuan’s tight trading band.
The yuan traded at between 8.2791 and 8.2796 to the U.S. dollar and closed at 8.2791, firmer than Wednesday’s close of 8.2830 _ the currency’s lowest point since Dec. 10, 1997.
``It’s a normal trading day. Companies are selling excess dollars for yuan,″ a trader at the Bank of Shanghai said.
The yuan’s weakness Wednesday prompted speculation that Chinese authorities were starting to experiment with a wider trading band for the currency, an idea that has been talked about since late last year.
China’s central bank, which monitors daily yuan-dollar trading, has kept the trading range between 8.2770 and 8.2800 in the past year.
The yuan, which is not freely convertible, has been unofficially pegged at 8.28 to the dollar since 1994.
Analysts said, however, that a more flexible foreign exchange regime is inevitable once China begins dismantling trade and investment barriers as a member of the World Trade Organization.
China expects to join the Geneva-based body that makes rules for world trade this year, after 14 years of trying.
A central People’s Bank of China official said Wednesday’s market fluctuation was normal and within the fixed trading range, the state-run newspaper China Business Times reported.
The currency’s drop below the 8.28 barrier was a result of a late transaction by a single trader urgently seeking hard currency, the official was quoted as saying.
Yuan trading is strictly controlled and speculation is virtually impossible.