Yuan gains stature as China loosens grip

  @sophia_yan December 18, 2013: 10:49 PM ET
chinese yuan

The yuan has gained this year to trade at record highs against the U.S. dollar


China is slowly relaxing its grip on the yuan, allowing the currency to hit record highs against the U.S. dollar.

So far this year, the yuan has gained 3% against the dollar, and that trend may well continue -- especially as Beijing seeks to bolster the currency's global role.

Historically, China has kept tight control of the yuan, limiting money flows in and out of the country. The government has even held down the exchange rate as a way to boost manufacturing and exports, prompting allegations of currency manipulation and criticism of its murky markets.

Related story: Investing in China just got easier

But change is afoot. China has loosened some foreign investment restrictions in recent months and made the yuan more widely accessible outside its borders.

The UK became the yuan's newest offshore hub earlier this year, with the British pound the fourth currency to trade directly against the currency after the U.S. dollar, Australian dollar and Japanese yen.

The government has also expanded a program allowing approved foreign firms to invest in mainland stocks, and relaxed the eligibility criteria.

Analysts have cheered China's steps to loosen its grip, and are increasingly optimistic as government officials tout measures to make the yuan -- or renminbi -- freely tradable, and to give markets a bigger role in the economy.

Related: China pledges greater role for markets

"We have also seen more official rhetoric in favor of a market-oriented renminbi," said HSBC's Paul Mackel. "In [light] of such developments, it is hard to see policy makers being more resistant toward a stronger renminbi."

Dealing in the yuan has increased, making it the the ninth most traded currency in the world, according to the Bank for International Settlements.

Related story: Europe, China agree currency deal

A pilot free trade zone in Shanghai that opened in September could also lead to more changes -- further bolstering the yuan's popularity.

China's Weibo a better bet than Twitter?

Despite these moves, the government still hasn't said when it might allow companies and individuals to trade the yuan across China's borders without major barriers.

Some experts say that step is crucial if Beijing wants the yuan to become a global currency. China will also have to consider a fully market-driven exchange rate. To top of page

Join the Conversation
Sponsored by
Index Last Change % Change
Dow 16,401.76 -23.09 -0.14%
Nasdaq 4,086.47 0.24 0.01%
S&P 500 1,861.85 -0.46 -0.02%
Treasuries 2.69 0.05 2.01%
Data as of 12:19pm ET
Company Price Change % Change
Bank of America Corp... 16.21 0.08 0.50%
Facebook Inc 59.61 -0.11 -0.18%
General Electric Co 26.74 0.62 2.39%
Micron Technology In... 23.46 0.98 4.34%
Huntington Bancshare... 9.15 -0.16 -1.72%
Data as of 12:04pm ET
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.41%4.44%
15 yr fixed3.33%3.31%
5/1 ARM3.34%3.55%
30 yr refi4.39%4.41%
15 yr refi3.31%3.30%
View rates in your area
Find personalized rates:
Rate data provided
by Bankrate.com
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.