PBOC adviser sees yuan rising three percent versus dollar

The yuan is likely to rise about 3 percent against the dollar by the end of this year, assuming the euro holds its ground against the US currency, Li Daokui, a central bank adviser, said on Thursday.
"If the euro stabilises at the current level, there will be modest yuan appreciation against the dollar. It's reasonable to see appreciation of about 3 percent, or less, by the end of this year," Li, one of three academic members of the People's Bank of China's monetary policy advisory committee, told Reuters.
But Li played down the extent of the yuan's possible rise, which he said would depend in part on the health of the international economy. The fact that China had restored exchange rate flexibility was of greater significance, he said.
"I want to stress that the degree of appreciation is not important. The important thing is that the process (of currency reform) has resumed," Li, an economics professor at Tsinghua University in Beijing, said.
The PBOC said on Saturday that it would once again let the yuan move more freely after having kept the currency more or less pegged to the dollar for two years to provide stability for exporters during the global downturn.
Taking a long-term view, Li said he expected the yuan to rise in value given China's productivity growth and strong balance of payments surplus.
But Li said freeing up the yuan was unlikely to trigger big inflows or outflows of capital. Asked whether de-pegging the yuan would affect domestic interest rate decisions, Li said the process of setting rates was not directly linked with exchange rate movements.
He said the key consideration was domestic inflation, and, indirectly, a more flexible exchange rate would help tame inflation.
The yuan, also known as the renminbi (RMB), hovered around 6.81 per dollar on Thursday, representing a rise of just 0.25 percent since the long-awaited policy shift.
US senators said on Wednesday they were unmoved by China's steps to partly free the yuan and vowed to push forward legislation to punish what they see as an unfair undervaluation of the currency that distorts trade and steals jobs.
For its part, China's Foreign Ministry restated Beijing's view that the yuan's exchange rate is not to blame for America's large trade deficit with China.
"The United States should not politicise the renminbi issue," spokesman Qin Gang told a regular news briefing. "The renminbi's appreciation or depreciation cannot basically solve the imbalances in Sino-US trade."