China's yuan eased against the US dollar on Thursday, although dealers believed the yuan was set to breach the key 8.0000 level in coming weeks after the United States fell short of naming China as a currency manipulator.
The yuan closed at 8.0041 to the dollar, down from Wednesday's close of 8.0037 after China's central bank set the Thursday mid-point, a reference rate, at a weaker 8.0062 from Wednesday's 8.0048.
Dealers mostly attributed the slide on Thursday to profit-taking after the currency had gained earlier this week, but the key focus was on the release of a US Treasury report on China's currency reform.
The US Treasury on Wednesday stopped short of naming China as a currency manipulator in its semi-annual report on the global economy, but said it would keep up pressure on Beijing to improve flexibility that will let the yuan rise in value.
"The US decision is regarded as a concession, and China is expected to respond with some sort of goodwill gesture to allow the yuan to rise in the coming weeks," said a forex dealer at a state-owned commercial bank in Shanghai.
China's Foreign Ministry spokesman Liu Jianchao told reporters on Thursday that Beijing would continue to improve its currency regime and provide for greater flexibility in the yuan.
"We will continue unswervingly to advance reform of the financial system and improve mechanisms for renminbi (yuan) exchange rate formation, giving play to the foreign exchange market and increasing flexibility of the renminbi exchange rate, improving the capacity of financial institutions to set their own prices and manage risks and ensuring the renminbi exchange rate remains stable at a suitable and balanced level," Liu said.
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