People’s Bank of China carefully controls renminbi strengthening

After China’s revaluation of the renminbi to Rmb8.11 to the dollar on Thursday, it slipped ever so slightly on Friday to Rmb8.1111 to the US dollar.

However, the People’s Bank of China intervened to stop the Chinese currency from strengthening from its opening point.

At least one analyst saw this as the proper thing to do, saying that to let it rise right away would encourage speculators.

Most analysts expect the renminbi to strengthen to between 7.9 and 7.95 to the US dollar by the end of this year and to between 7.5 and 7.75 by the end of 2006, although the Bank of America expects to see it remain around Rmb8.11 until the end of the year and at 7.89 by the middle of 2006.

Malaysia also limited the movement of the ringgit, which it also removed from its peg to the dollar on Thursday, allowing it to rise by only 0.7 percent. It rose to M$3.775 in relation to the US dollar.

In other Asian currencies, the South Korean won gained 1.5 percent on the US dollar to Won 1,020, while the Taiwan dollar was up 1.3 percent to T$31.54 against the US dollar. Both those countries also moved to limit gains.

The yen, which was higher on Thursday on the news of the renminbi’s revaluation, lost value on Friday when it became clear that China was limiting its currency’s rise.

Still, the yen ended the week 0.7 percent higher in relation to the euro, at ¥134.06, and it was 1 percent higher in relation to the US dollar at ¥111.06 as well as having gained 1.7 percent in relation to sterling for the week, to ¥198.30.

Sterling had a bad week, losing 0.6 percent to $1.7408 in relation to the US dollar, falling 1 percent to £0.6935 in relation to the euro, and declining by 2.8 percent against the Australian dollar to near an 8-year low of A$2.2729.

The euro gained 0.4 percent in relation to the US dollar over the week , to $1.2074.

The Australian dollar also performed well against the greenback, rising by 2.3 percent to $0.7658.

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