China Ministry of Commerce Thinks Yuan Will Continue to Appreciate

The Chinese yuan is set to strengthen as rising inflows of speculative capital add to pressure on the currency, the head of a Ministry of Commerce research institute said.

“Hot money is flowing into China, and that will push up the yuan exchange rate,” Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation under the ministry, said in an interview in Beijing yesterday.

The yuan had its biggest weekly gain in six months after People’s Bank of China Deputy Governor Yi Gang said the daily trading band that’s been limiting appreciation against the U.S. dollar since October may be widened. The largest jump in foreign-exchange reserves in almost two years in the first quarter adds to signs capital inflows are increasing.

“China’s situation is exactly the opposite” of Japan’s, said Huo, who previously worked as a trade official in the commerce ministry. The yen is expected to continue weakening amid the Bank of Japan (8301)’s policy easing, Huo said, estimating the currency could drop to 110 per dollar this year.

The yen has dropped almost 20 percent since mid-November, when the election which brought Prime Minister Shinzo Abe to power was announced. He won on a platform of unlimited monetary easing to end more than a decade of deflation.

Bloomberg

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