Today the yuan rose to heights not seen since 1993, amid increasing pressure from the US to allow the currency to ‘naturally’ appreciate in the market.
The pressure is also on US lawmakers to make China change its currency policy, as the US trade deficit with China increased to a staggering $28 billion this August.
The yuan today completed six consecutive weeks of increase, after the People’s Bank of China set the rate today to 6.6497 to the dollar. This is the highest it has been since the policy which pegged the currency to the dollar came to an end in 2005.
With the pressure on Beijing, many onlookers are wondering why it is taking so long, given that it makes both political and economic sense to allow the yuan to strengthen.
While Zhou Xiaochuan, governor of the central bank in China stated today that China will continue to reform the currency policy, there is also more pressure expected when a bi-annual report from the US Treasury Department, detailing whether China is manipulating its currency is released later today.
Last week’s IMF meetings were a springboard for many countries to complain about the currency policies in China, and US Treasury Secretary, Timothy Geithner also renewed the calls for China to let its currency strengthen.
The yuan has risen 2.8 percent since June, when the Chinese central bank promised to pursue a more flexible currency policy and exchange rate. Previsously, China had blocked appreciation of the yuan for nearly two years.
