Yuan falls as China makes good on flexibility vow

On Tuesday, China pulled back the veil on its new currency regime a little further, appearing to engineer a fall in the yuan to make... More Below... Posted by on Jun 22nd, 2010 and filed under Finance.

On Tuesday, China pulled back the veil on its new currency regime a little further, appearing to engineer a fall in the yuan to make clear its vow of flexibility did not include one-way bets for appreciation.

In an indication that Beijing will allow its currency to appreciate at a far slower pace than demanded by its critics in the West, big Chinese state-owned banks kept the yuan in check a day after its biggest rise since the currency was revalued in 2005.

By the standard of freely floated currencies, the two-way movement in the yuan is not great but is unprecedented in China where until this week the central bank had squashed intraday volatility via intervention.

China is relaxing its control on the yuan ahead of this weekend’s G20 summit of world leaders in Canada, breaking a two-year dollar peg that had been a lightning rod for critics who say the currency is undervalued and gives Chinese exporters an unfair trade advantage.

(article source: Reuters, image source: The Straits Times)

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