China's Yuan Weakens despite US Anger

BEIJING, KOMPAS.com - China’s yuan weakened against the dollar on Friday, despite a blunt call from US Treasury Secretary Timothy Geithner for Beijing to attack trade distortions by letting the currency strengthen. The yuan was trading at 6.7301 to the dollar in early trade, down from its close Thursday of 6.7248, Dow Jones Newswires reported.

“The central parity was certainly higher than expected and so demand for the dollar has again dominated trading this morning,” a Shanghai-based trader at an Asian bank said.

The yuan’s decline came despite the People’s Bank of China setting the central parity rate — the middle of the unit’s allowed trading band — at 6.7172. It was the strongest level since Beijing pledged in June to loosen its grip on the yuan. Running up to November elections, US lawmakers are weighing bills that would slap sanctions on Chinese goods amid accusations that Beijing keeps its currency — and thereby its exports — artificially cheap.

Geithner, testifying in Congress on Thursday, abandoned his previous restraint on the issue, saying it was “past time for China to move” on the yuan and lift trade barriers. Despite June’s “important” pledge by Beijing, Geithner said the Chinese currency’s value was “essentially” unchanged in the past two years because of “very substantial” intervention by the authorities.

Since June the yuan has appreciated about 1.6 percent against the greenback and gained about 0.7 percent this week ahead of Geithner’s testimony. But Geithner also tried to put the currency dispute in the context of a wider and mutually beneficial trade relationship between the United States and Asia’s rising power. There was no immediate response from Beijing to Geithner’s remarks.