Chinese Yuan Price History

June 21, 2010

The yuan depreciated 82.6% from 1.5 renminbi per dollar in 1980 to 8.62 per dollar in 1994 and had recovered 4.1% by 1997 when it was pegged at 8.277.  Note that China’s currency carries two interchangeable names, the renminbi and the yuan.  The yuan remained frozen against the dollar through the launch of the euro at the start of 1999 and beyond until a 2.1% revaluation against the dollar on July 21, 2005.  Compared to the start of 1999, the yuan was up 2.1% against the dollar right after the revaluation but 2.1% weaker against the euro.

Over the remainder of 2005, the renminbi gained another 0.5% against the dollar but eased 0.5% against the euro.  On July 21, 2006, one year after the yuan had been decoupled from the dollar, it showed a net 3.7% rise against the dollar but had accrued a loss against the euro of 2.2% in the year and 4.2% since the euro’s birth.  At end-2006, the yuan had climbed 6.0% against the dollar since the initial revaluation in July 2005 but had lost 5.7% against the euro.  Two years after the revaluation saw the renminbi with a cumulative rise of 9,3% against the dollar and a drop of 7.4% relative to the euro.  The net changes by end-2007 were plus 13.1% against the dollar and minus 9.2% the euro.  And by the time that three whole years had rolled around since the July 2005 revaluation, China’s currency had gained 21.2% against the dollar but lost 10.4% euro.

During the three years of the crawling upward peg against the dollar, the rate of appreciation intensified progressively, reaching 14.0% annualized between the end of 2007 and July 11, 2008 when the policy was suspended abruptly.  The second feature of this policy is that gains against the U.S. currency were mitigated partly by losses against the euro.

Officials signaled this past weekend that the yuan would again be allowed to move higher against the dollar.  There was no initial multi-percentage point adjustment as occurred on July 21, 2005, just a market-driven but highly controlled uptick of 0.4%.  Officials served notice that further adjustments will be gradual.  Meantime, by not allowing any movement against the dollar for the past 23-1/2 months, net changes in the yuan since July 20, 2005 amount to 21.8% against the dollar or 4.1% per annum and 15.4% against the euro or 3.0% per annum.  The dollar moreover remains 353% stronger against the yuan than in 1980.

Beijing officials continue to play run their currency policy very coyly.  Investors are in the dark, other than being told that the policy will continue to be highly controlled by officials, that daily moves will be small, and that the policy remains an internal matter alone.  Investors cynically see today’s initiative as a gesture meant to keep the issue off the Toronto G-20 summit agenda and to forestall U.S. senate calls for punitive trade barriers against Chinese imports.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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