Yuan to Rise ‘a Bit More,’ Brazil’s Meirelles Says
China may let the yuan gain “a bit more” within 12 months as the world’s third-largest economy moves away from a currency policy that creates distortions, Brazilian central bank President Henrique Meirelles said.
“We will see a bit more appreciated currency in a gradual move towards an open economy” a year from now, Meirelles, 64, said in an interview in Rio de Janeiro ahead of Chinese President Hu Jintao’s visit to Brasilia tomorrow. “We have expressed our opinion that all the currencies should float, and the Chinese currency should float as well.”
Meirelles’s comments add to international pressure on China to end the yuan’s peg to the dollar just as the heads of state from Brazil, Russia, India and China ready for a summit in Brasilia this week. Hu told President Barack Obama yesterday that China wouldn’t yield to “external pressure” after the U.S. leader urged the Asian country to move toward a “more market-oriented exchange rate.”
Twelve-month non-deliverable yuan forwards declined 0.2 percent to 6.6340 per dollar as of 12:28 p.m. in New York, the biggest loss since March 22, according to data compiled by Bloomberg. The contracts reflect bets the currency will strengthen 2.8 percent from the spot rate of 6.8256.
A stronger yuan would boost manufacturing exports for several countries, Meirelles said in the interview yesterday. For Brazil, a weaker yuan creates fewer problems than for other countries, he said.
‘Welcome Move’
China surpassed the U.S. as Brazil’s biggest trading partner last year, as exports of iron-ore and soy increased during the global financial crisis while sales of manufacturing goods to the U.S. declined.
The appreciation of the yuan “probably would mitigate the fact that Chinese exports are low priced,” Meirelles said. The weak currency “is a problem for some industrial sectors. It creates severe distortions in the world economy.”
Yuan forwards rose by the most this year on April 8 after the New York Times reported that the Chinese government is “very close” to changing its exchange-rate policy that has held the yuan at about 6.83 per dollar since July 2008.
China may allow the yuan to appreciate by June 30 to curb inflation while avoiding a one-time jump in value that might endanger export jobs, a Bloomberg survey showed. The Chinese central bank will allow the currency to float more freely this quarter, 12 of 19 respondents said in the survey.
Meirelles said it was up to China, as a sovereign nation, to manage its economy as it best saw fit. Any appreciation would be a “welcome move” that will help correct global economic imbalances, he said.
U.S. lawmakers such as Senator Charles Schumer, a New York Democrat, complain that China is deliberately keeping the value of the yuan depressed to help its exporters, and have urged Treasury Secretary Timothy Geithner to label China a currency manipulator.
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To contact the reporter on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net;
