China Yuan Up After Report Says May Trade Data Were Strong

evan / 2010-06-09

HANGHAI (Dow Jones)--China's yuan was higher against the U.S. dollar Wednesday afternoon after a report said May's trade data were strong, but the gains were capped by expectations Beijing won't allow the yuan to appreciate much any time soon.

On the over-the-counter market, the dollar was at CNY6.8287 around 0730 GMT, down from Tuesday's close of CNY6.8295. It traded between CNY6.8285 and CNY6.8298.

The dollar-yuan central parity rate was set at 6.8282, down slightly from 6.8284 Tuesday.

China's exports rose about 50% in May from a year earlier to about $130 billion, up from April's growth rate of 30.5%, Reuters reported Wednesday, citing sources who it said had been briefed by an unnamed senior government official. China's inflation rose to 3.1% in May from 2.8% in April, the report also said.

"Yuan appreciation pressure would rise with stronger trade data, but there has been diminished expectations for a change in China's exchange rate policy in the near future," said a Shanghai-based trader at a European bank.

China is due to issue its trade data for May on Thursday and the inflation data on Friday.

Traders also said the central bank is unlikely to change its loose monetary policy stance soon, and the recent modest movements in the spot market reflect corporate demand rather than any conviction either way.

"There are uncertainties about the fallout from the euro-zone debt crisis and the central bank's wait-and-see approach is likely to continue for a while," said a Shanghai-based local bank trader.