China's yuan closed a tad higher against the dollar on Thursday as the central bank reiterated its long-standing policy of keeping the currency's exchange rate basically stable.
A state newspaper argued on Thursday for a gradual opening of the country's foreign exchange regime amid a visit to Beijing by a pair of senators from the US, which is threatening to impose tariffs on China unless it revalued the yuan.
"The yuan is likely to move narrowly for a few days after its recent rally," said a Shanghai-based dealer at a foreign bank. "We don't believe it will quicken its pace of appreciation during the current politically sensitive period."
The yuan finished at 8.0277 to the dollar, up from Thursday's close of 8.0282, after the central bank set the mid-point of the yuan's exchange rate to the dollar at a slightly stronger at 8.0296 versus Wednesday's 8.0306.
The yuan has now appreciated a further 1.01 percent since it was revalued by 2.1 percent to 8.11 per dollar on July 21, and freed from a dollar peg to float within managed bands.
The yuan hit a post-revaluation high of 8.0232 versus the dollar on Monday after it scored a 0.24 percent gain last week - a weekly record increase since the ground-breaking policy change. It reteated slightly on Tuesday and Wednesday.
Dealers said the yuan was likely to move in a narrow range between 8.0250 and 8.0300 in coming days.
The People's Bank of China, the central bank, said on Thursday it would continue to pursue a stable monetary policy and seek basic balance in its international payments situation.
"We will keep the yuan basically stable at a reasonable, balanced level," the central bank said in a brief statement on its Web site (www.pbc.gov.cn), repeating a pledge that Beijing would improve the flexibility of its exchange rate regime.
The statement was issued during a visit by US senators Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, authors of a bill that threatens China with a 27.5 percent tariff on exports to the United States unless Beijing allows the yuan to rise significantly against the dollar.
The official China Daily said on Thursday the senators' visit is unlikely to resolve the issue, urging a steady-as-she-goes approach to foreign exchange reform.
"Financial reform planners are wary of radical steps because they would certainly cause negative shocks to Chinese firms, the Chinese economy and the region," the newspaper said in an editorial.
"It takes time to lift restrictions on capital flow one by one. It takes time to introduce risk-hedging tools, which are necessary for managing a more flexible currency," it said.
Economists said the comments are in tone with official lines.
"Their advice could be summarised as recommending 'evolution' rather than 'revolution' in policy reform," Adrian Foster, forex Strategist at Dresdner Kleinwort Wasserstein, said in a note.
The two senators were scheduled to hold a media briefing in Beijing later on Thursday to discuss their China visit.
The political manoeuvres came ahead of a visit to the United States in April by China's President Hu Jintao, during which US authorities are also likely raise the yuan issue.
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