China's yuan closed marginally weaker versus the dollar in quiet, narrow trade on Thursday, little moved by signs of growing US pressure on China to let its currency appreciate faster. The yuan, which had risen for four straight trading days, closed at 7.6936 to the dollar after touching a high of 7.6932 and a low of 7.6977. It ended at 7.6935 on Wednesday.
Traders said the risk of US action against China over the yuan had clearly increased after senior Democrats in the House of Representatives vowed on Wednesday to pass legislation against countries believed to be manipulating their currencies.
Speaking at a House of Representatives hearing, Deputy Assistant Treasury Secretary Mark Sobel said the Bush administration was "totally frustrated" by the slow pace of Chinese currency reform, although he did not believe Beijing was controlling the yuan to gain a trade advantage.
Traders said the foreign exchange market had largely anticipated the US rhetoric over the past several days, so it was now waiting to see if there would be any concrete US measures. "The break of 7.70 was in response to the prospect of US pressure, so the market is quite stable. People are waiting to see if there's any real action," said a dealer at a bank in Beijing.
The likelihood of action may not become clearer until the May 22-24 trade talks between US Treasury Secretary Henry Paulson and a Chinese delegation led by Vice Premier Wu Yi, traders said.
The Chinese central bank's setting of a yuan mid-point of 7.6965 on Thursday, only marginally higher than Wednesday's mid-point of 7.6971, also deterred the market from aggressively pushing the Chinese currency higher.
Many in the market believe China wants to avoid being seen to bow to US pressure, so US rhetoric over the yuan may actually prompt the central bank to keep the currency more stable in the immediate term.
Comments
Comments are closed.