By how many percent has the Chinese Yuan increased against the Pound since May 2006?

Answer 1

On 31 May 2006 there were 14.90152 Yuan to the Pound Sterling.

On 19 October 2006 there were 14.76617.

The percentage increase is 0.91%. Just under 1 percent

Answer 2

With limits on appreciation, the Yuan has been kept on a tight leash for the last year, but will it last? Nick Bull looks at what the future holds…

A year ago, the Chinese Yuan was a hot topic of conversation. After a decade pegged at 8.278 to the US Dollar, the growing Chinese trade surplus meant that the Chinese authorities had to buy ever more Dollars to hold the peg in place. Although this made China one of the largest investors in US securities, particularly in Treasury bonds, the US government alleged that the undervalued Yuan represented unfair competition. The extent of the undervaluation was argued to be anything between 10pc and 40pc. It seemed that the Yuan would either be allowed to float freely or, more likely, be revalued against the Dollar. A revaluation was eventually announced in July. The Yuan increased in value by 2.07pc against the Dollar and it was announced that the link would in future be to a basket of currencies, not just to the Dollar itself. It was also mentioned that the opening price of 8.11 could move by up to ±0.03% per day.

Over the course of the following months, that daily flexibility has allowed the Yuan to appreciate by a further one percent. But the (total) three percent that it has appreciated thus far is a long way short of the 10pc that was looked for a year ago, let alone the 40pc that some analysts called for. China’s economy grew by almost 10pc in 2005 and its massive trade surplus continues to widen. The US economy grew by a rather more modest 3.5pc in 2005 and its trade deficit is becoming worse. There is still suspicion in the US Treasury that China is cheating on trade by manipulating its exchange rate. The subject will certainly come up when President Hu Jintao visits Washington in April. Unless any new major agreement is reached in Washington – unlikely – the Yuan will be allowed to appreciate by no more than three or four percent a year against the Dollar. That is the opinion of Bank of China Executive Vice President Zhu Min and he, as a senior guy in one of the biggest state-owned banks, ought to be in a position to know about these things.

Assuming that Mr Zhu is correct, how will this affect the Yuan from Sterling’s point of view? Even though the Yuan is now theoretically linked to a basket of currencies, that basket is still heavily weighted towards the Dollar because a high proportion of China’s trade is with the USA. Against Sterling, the Yuan therefore tends to move in step with Sterling’s movements against the Dollar. Using Mr Zhu’s forecast, if the Yuan gains four percent against the Dollar over the coming year and the Pound appreciates likewise, there will still be around 14 Yuan to the Pound in a year’s time. No change. If the Pound repeats its performance over the last twelve months, losing nine percent against the Dollar, there will be less than 12.5 Yuan to the Pound next March.
For almost six months the Pound has stayed within a band between $1.71 and $1.79. Although US interest rates have been rising for almost two years, they will probably peak at 5pc before summer. UK rates have been at 4.5pc since last August and look as though they will be stuck there for several months. If nothing changes before the end of the year, the extra half percent return on Dollar deposits should allow the Dollar to drift stronger against the Pound. For Sterling to strengthen against the Chinese currency, it needs to strengthen more quickly than the Yuan against the Dollar – more quickly than Mr Zhu’s three to four percent a year.

So if a property purchase in China is on the cards for this year it would make sense to take some precautions against a rising Yuan; to guard against a higher Sterling purchase cost. Buy at least some of the Yuan in advance. There is no need to empty the Sterling bank account. Just put down a small percentage as deposit to lock into an exchange rate for six months ahead. It is known as a “forward” transaction in the professional FX market. Your High Street bank’s call centre in Mumbai will probably never have heard of the concept and, even if it has, probably won’t care unless you are a FTSE100 company. So have a word with a currency specialist. Cover some of the exchange rate risk now.

Even if you have to wait for a year to gain title to the property, at least you can be more sure of the price that you are paying.


http://www.bangkokbank.com/download/MonthlyForex_EN200604.pdf

http://www.forexblog.org/2006/04/index.html

Answer 3

I'm not sure

But Chinese Yuan is fixed and doesn't change, the real question is how has the Pound shifted

Answer 4

The same as the US dollar against the Pound.
The Yuan is pegged against the US dollar.