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On the foreign exchange market, China's yuan closed two notches down against the US dollar at 8.2774 yesterday due to importer dollar demand, still firm after the country posted its first quarterly trade deficit in seven years, dealers said.
The yuan moved in a tight box of 8.2772 to 8.2775 as turnover fell to a moderate US$360 million from US$400 million on Friday.
"Importers bought more US dollars today but the yuan still managed to close near the firm end of its trading range due to ample US dollar supply on the market," said a dealer at a domestic bank.
"The impact of the trade deficit in the first quarter was offset by strong surpluses over past years," he added.
China announced on Friday a trade deficit of US$1.03 billion for the first three months of this year.
Dealers said that deficit was small compared with a trade surplus of more than US$7.3 billion in the first quarter of 2002. But the yuan could come under pressure if the deficits continued, they said.
The yuan has been strong over the past year, moving near the high end of the wafer-thin range of 8.2760 to 8.2800 which the central People's Bank of China enforces to guard against shocks to the economy.
Currency movements within that box are decided basically by China's trade performance because the yuan is not fully convertible on the capital account.
Most Chinese trade firms are required to sell hard currency earnings to commercial banks designated to trade on the market.
The yuan firmed yesterday against the Japanese currency to 6.8734 per 100 yen from 6.9123 on Friday, and strengthened to 8.8864 versus the euro from 8.9196. It ended a notch weaker against the Hong Kong dollar at 1.0610.
(China Daily April 15, 2003)
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