Yuan hoarding causes shortage in HK...

Sorry, no yuan! That's the message from several Hong Kong money changers as speculators scramble to stock up in anticipation of the currency rising further.
A local bank manager is not surprised that yuan stocks have ran out as supply is tight.

"People are banking on reports that the United States is pressing for a 10 percent yuan appreciation, despite Beijing saying any appreciation will be gradual," he told The Standard on condition of anonymity. "People want to make a fast buck since interest in the Hong Kong dollar is low. So the yuan is a sure bet for anybody."

A source at the Hong Kong Monetary Authority said the shortage at money changing counters could be due to another factor - hoarding.

"Money changers are expecting the yuan to appreciate faster and sooner, and so they are holding on to their stocks," the source said. "The fact that there is no cap on conversions to yuan has put them a difficult position in both quoting and selling of the currency.

"They obviously do not want to sell large amounts of yuan."

Local banks have confirmed they have an unlimited supply of yuan, which they get directly from the mainland central bank, the People's Bank of China.

Think tank urges widening of yuan band...

China should widen the yuan's daily trading transaction band and return to the exchange rate mechanism that was in place before the global financial crisis, the Business Post reported, citing a government think tank's report.

We picked this report up from China Watch Blog, which said it learnt that Beijing allowed the yuan to gradually rise 19% against the US dollar, after a 2.1% revaluation in July 2005, before freezing it near 6.83 to the dollar in July 2008 to provide stability during the worldwide credit crunch.

"In response to constantly growing pressure for renminbi (yuan) appreciation, we should consider appropriately expanding the currency''s floating band," said the State Information Centre (SIC), a research outfit under the National Development and Reform Commission, the powerful economic planning agency.

The People's Bank of China now lets the yuan rise or fall by 0.5 percentage point a day against the US dollar from a midpoint it sets each morning. In practice, the full width of the band has rarely been used.

In a report published in the official China Securities Journal, the SIC recommended that moves in the yuan should be gradual and "controllable" - the long-standing formula used by mainland policymakers.

"With expectations of yuan appreciation gradually building in the international community, it would be better to time the widening of the yuan's band before more hot money rushes into China," it said.

The think tank also said economic growth was likely to slow moderately this quarter, while inflation would accelerate. Gross domestic product growth from a year earlier would ease to 10.% form 11.9% in the first quarter, the SIC forecast.

Consumer inflation is expected to rise 4.2% in the first three months, owing to rising import prices, a low base effect from 2009, and the impact of bad weather. Private economists also expect inflation to rise and growth to slow down this quarter.