China's yuan rose against the dollar on Monday, hitting its highest level since its July 2005 revaluation amid lingering global dollar weakness. The yuan closed at 7.8275 to the dollar, compared with Friday's close of 7.8360 to the dollar.
It hit a post-revaluation high of 7.8230 in intraday trading, erasing the former high of 7.8280 on Friday and having hit such highs nearly every day over the past two weeks. The dollar weakness also allowed the People's Bank of China to set the daily mid-point of the yuan at another record high of 7.8240 on Monday morning, much stronger than 7.8331 on Friday.
Dealers also expect the central bank will allow the yuan to rise faster before a planned visit by US Treasury Secretary Henry Paulson in mid-December to create a friendly atmosphere for the Sino-US dialogue. "China is likely to make a goodwill gesture around the time of Paulson's visit," said a dealer at a European bank.
A group of senior US government representatives - including US Federal Reserve Chairman Ben Bernanke - will accompany Paulson to visit Beijing, dealers said.
However, dealers said, the pace of the yuan's rise in the coming weeks would still be gradual and under the control of the central bank, as Beijing is concerned a rapid appreciation would hurt its domestic economy and exports.
One-year offshore NDFs quoted the yuan at 7.5025/7.5075 to the dollar, forecasting a yuan rise of between 4.22 and 4.29 percent from Monday's mid-point. That was up sharply from 3.87 and 3.94 percent two weeks ago.
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