China to Keep Yuan Stable Until Second Half, Invesco's Greenwood Predicts

China will keep the yuan unchanged against the dollar until after June as exports have not returned to pre-financial crisis levels, according to John Greenwood, chief economist at Invesco Asset Management in London.

Greenwood, who was the architect of Hong Kong’s fixed exchange rate system, also said the city’s currency will remain pegged to the greenback when China allows the yuan to move. He said he expects China won’t do a one-step appreciation of the yuan, which will appreciate an average of 4 percent to 5 percent per year against the U.S. currency.

“They would like to see exports return to the sort of level they achieved before the crisis and we haven’t achieved that yet,” Greenwood said in a Bloomberg Television interview today. “The renewed appreciation will probably start sometime in the second half of this year, sometime in the summer.”

Speculation the Group of 20 nations will press China for a revaluation lifted yuan forwards to their strongest in three months yesterday. Twelve-month non-deliverable yuan forwards traded little changed at 6.612 per dollar today, 3.3 percent stronger than the spot rate of 6.8275.

After scrapping a peg to the dollar in July 2005, the Chinese government allowed the yuan to gain 21 percent before holding it at about 6.83 to the dollar since July 2008. While that aids its exporters, it has incurred criticism abroad for hurting foreign companies and fanning Chinese inflation.

G-20 finance chiefs begin a day of talks at 9:30 a.m. in Washington, with a statement and press conferences scheduled for about 5 p.m.

Hong Kong Dollar

Speculation that policy makers would be forced to abandon the peg increased last year as funds poured into Hong Kong and the central bank sold more than HK$480 billion ($62 billion) to prevent currency appreciation. Pressure for gains has eased this year as the U.S. dollar rallied, allowing the Hong Kong dollar to strengthen against the euro and the yen.

The currency has been pegged to its U.S. counterpart since October 1983 and in May 2005 policy makers introduced a trading band, pledging to buy or sell should it rise or fall more than 5 Hong Kong cents either side of HK$7.80 per dollar.

“For the time being, the Hong Kong dollar will not move,” he said. “There’s no plan to move it, there’s no intention, and the mechanism is such that there’s no need for it to move even if the Chinese currency starts to appreciate.”

To contact the reporters on this story: Bob Chen in Hong Kong at;

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.