Yuan rises against US dollar

Re-elected US president Barack Obama is expected to continue the US stance pressuring China toward exchange rate regime reform, though he is believed less likely to lead a trade war between the world's top two economies, market analysts said Wednesday.

The value of the Chinese currency, the yuan, on Wednesday appreciated against the US dollar at 6.2437, touching the daily trading ceiling for the seventh day in a row.

The central parity rate set by the central bank was 6.3067 Wednesday, down 11 basis points from Tuesday, as US president Barack Obama won re-election, and on the eve of the 18th National Congress of the Communist Party of China (CPC).

The dollar also weakened against other major currencies Wednesday on speculation that the US will continue monetary stimulus policies during Obama's second term as US president.

"Obama is less likely to launch a trade war against China. With Obama in office for four more years, we should expect relatively fewer 'accidents' in Sino-US economic relations," Ma Jun, chief China economist at Deutsche Bank, said in a research note sent to the Global Times Wednesday.

In the election campaign, Republican rival Mitt Romney has been significantly harsher on China than Obama has, claiming that he would name China a currency manipulator immediately after taking office, believing that China created an unfair export advantage by artificially keeping its currency value low.

Though less harsh than Romney, Obama will continue to push for the appreciation of the yuan against the dollar in the interest of American businesses, Zhou Dewen, president of the Wenzhou Council for the Promotion of Small- and Medium-sized Enterprises, told the Global Times Wednesday.

The appreciation of the yuan against the US dollar is a long-term trend that will not suffer sudden big changes, so Chinese companies need to adapt to the situation and add value to their products to increase competitiveness, Zhou said.

The value of the yuan has picked up more than 2 percent against the US dollar since late July.

The recent appreciation of the yuan was mainly driven by market forces such as the inflow of hot money under the US Federal Reserve's third round of quantitative easing policy, Chang Jian, a China economist at Barclays Capital, told the Global Times Wednesday.

Another factor is that trading companies started to sell the US dollars they had in hand for yuan because they expected the yuan to appreciate further, which pushed down the value of the dollar against the yuan, said Ma of Deutsche Bank.

China will pay more attention to the steady growth of the economy, ensure the implementation of existing policies, and fine-tune economic policies for stable and relatively fast economic development, Cai Mingzhao, spokesman for the 18th National Congress of the CPC, said at a press conference Wednesday.

China hopes that the newly elected US administration will continue active policies toward China; strengthen dialogue and enhance mutual trust, cooperation, and respect for each other's core interests; and effectively control disputes so as to promote Sino-US strategic partnerships, Cai said.

The exchange rate of the yuan has become more flexible since China authorities increased the trading band of the yuan against the dollar from the original 0.5 percent to 1 percent in April, which is regarded as a small step toward exchange regime reform, Goldman Sachs said in a recent report, noting that they believe new Chinese leaders will continue to push forward this reform, though slowly.

"We expect the fluctuation band to be expanded from the current 1 percent to 2.5 percent, after the US president's re-election and the 18th National Congress of the CPC," Lu Zhengwei, chief economist of Industrial Bank, said in a research note.