China Says Banks Have Discretionary Right to Set Yuan Exchange

China's foreign exchange regulator defended local banks quoting the renminbi exchange at an unprecedented high of 7.9997 to the dollar last week, saying banks have discretionary rights to set exchange rates that are different from market rates.

``This was in line with the existing exchange rate regulations and was normal market behavior by the banks,'' the State Administration of Foreign Exchange said in a statement posted late last night on its Web site.

China's yuan closed at a new high yesterday of 8.0796 from 8.0825 on Nov. 28, the People's Bank of China said on its Web site yesterday. The Chinese currency yesterday surpassed its previous post-revaluation high of 8.0805 reached on Nov. 24.

China revalued the yuan by 2.1 percent to 8.11 against the dollar on July 21 and started managing its value against a basket of currencies including the euro and yen. The currency is allowed to move by as much as 0.3 percent against the dollar either side of a daily fixing rate set by the central bank. The maximum movement is 3 percent against the euro, yen and other currencies.

The Bank of China, for instance, and some other banks quoted a 7.9997 yuan buying price for the dollar on Nov. 25, the first time the currency had passed below the 8 yuan to the dollar mark and the strongest performance of the yuan since it was un-pegged to the dollar on July 21, the statement said.

``Each bank has the discretion to set the exchange rate that is between the rate quoted by the State Administration of Foreign Exchange and the rates derived from trading among banks,'' the statement said.

The yuan, a denomination of China's currency, the renminbi, closed at 9.5453 to the euro yesterday, compared with 9.4504 at the previous day's closing, the central bank said yesterday.

The currency ended the day yesterday at 0.067866 against the yen, from 0.067419, and at 1.0416 against the Hong Kong dollar, compared with 1.0419 at the previous close.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.