The Associated Press is reporting that China's official exchange rate broke through the psychologically important 8 yuan per dollar level Monday, its highest level in more than a decade, in a move traders said might signal Beijing's willingness to allow its currency to appreciate faster.
Analysts said the U.S. government's decision to not formally accuse China of manipulating its currency in a semiannual report last Wednesday may have freed Beijing to let the yuan, also known as the renminbi, or "People's Money," rise further.
The yuan's gain affected currency trading elsewhere, spurring traders to sell dollars for yen due to Japan's proximity to China. Meanwhile, the surge in China's trade surplus has added to pressure on Beijing to let the yuan's value rise faster.
"The PBC (People's Bank of China) has kept the renminbi stable against the U.S. dollar over the past month for mostly political reasons," Jonathan Anderson, chief Asia economist for the UBS brokerage in Hong Kong, said in a research report issued Monday. He forecast "more aggressive action" on the exchange rate.