China set the strongest exchange rate for the yuan in several years on Monday after coming under renewed pressure to let the currency appreciate at the G20 weekend summit in Toronto.
AFP - China set the strongest yuan exchange rate in years on Monday after Beijing came under renewed pressure at the Group of 20 summit over the weekend to let the currency appreciate.
The People's Bank of China said it set the central parity rate -- the centre point of the currency's allowed trading band -- at 6.7890 to the dollar, a fraction of a percent stronger than Friday's 6.7896.
It was the strongest level policymakers have set since China unpegged the currency in July 2005 and moved to a tightly managed floating exchange rate.
At the G20 meeting in Toronto, US President Barack Obama said he expected China to take seriously a promise made a week ago to allow yuan flexibility, which he said has given Beijing a significant trading advantage.
"My expectation is that they're going to be serious about the policy that they themselves have announced," Obama said at the end of the summit on Sunday.
Brazilian Finance Minister Guido Mantega also urged China to let the yuan strengthen more quickly in order to level the playing field for world trade.
China's central bank pledged to let the yuan trade more freely against the dollar but ruled out dramatic moves in the currency or a one-off appreciation.
The action was widely seen as a bid to head off an ugly spat at the G20 meeting following months of intense pressure on Beijing to embrace currency reform as part of efforts to enhance a global economic recovery.
The currency appreciated 0.53 percent against the greenback over the course of last week.
Analysts downplayed the significance of Monday's move, saying it might temporarily appease critics but did not presage a significant revaluation of the currency.
The slight increase in the yuan was a deliberate attempt by Beijing to make its currency policy "more acceptable" to critics, said Ken Peng, a Beijing-based economist at Citigroup.
"I don't think they are in a hurry to appreciate the currency," he said.
Obama's comments would have "some influence" on policymakers but any move in the currency would fall short of US lawmakers' demands, said Xiong Zhiyong, an expert on US-China relations at the Foreign Affairs College in Beijing.
Some experts say the yuan is undervalued against the dollar by up to 40 percent.
US lawmakers have threatened to press ahead with legislation they said would treat "currency manipulation" as an illegal subsidy and enable US authorities to impose tariffs on Chinese goods.
But a senior Chinese official attending the G20 summit in Canada said Beijing would not bow to international pressure for a stronger currency.
"If there is a change in the renminbi (yuan) exchange rate it is up to the internal dynamics of the Chinese economy rather than subject to the pressure of any individual country or international organisation," said Ma Xin, the director general of the National Development and Reform Commission.
The commission has broad controls over China's economy.
China had effectively pegged the yuan at about 6.8 to the dollar for the past two years to prop up exporters during the global financial crisis. Critics say the policy gives Chinese producers an unfair advantage.
Date created : 2010-06-28