The renminbi (RMB) hit a new high against the US dollar on Wednesday.

 

The rate was 7.9598 yuan to one US dollar, following a new record that was set on Tuesday when the RMB strengthened to 7.9669 yuan to the dollar.

 

China has seen a continuous appreciation in its RMB since the central bank raised the one-year benchmark interest rate on August 19.

 

The rise in interest rates, which is expected to result in further appreciation of the RMB, could be followed by the widening of the floating band between the RMB and the US dollar, said market observers.

 

China set a floating band of 0.3 percent when launching its reform of the RMB exchange rate system last July, which means that the trading price between the dollar and the yuan on the inter-bank foreign exchange market will float within a 0.3 percent band around the official central parity.

 

Currently, the daily fluctuation of the RMB against the US dollar has reached both the upper and bottom limits of that 0.3 percent.

 

Experts believe that the widening of the daily floating band may temper appreciation of the RMB as it increases the possibility of RMB depreciation.

 

(Xinhua News Agency August 30, 2006)