SHANGHAI: The yuan was little changed against the dollar on Thursday while China and the United States exchanged the usual political rhetoric on currency and trade issues during an ongoing visit to the United States by Chinese leader-in-waiting Xi Jinping.
The People's Bank of China fixed the yuan's mid-point weaker and near the key 6.3 per dollar level, pulling it back from a record high last Friday, a move that could signal a desire to keep the yuan in a narrow range over the near term.
China is under lingering US pressure to let its currency appreciate to help balance bilateral trade, but its exports fell slightly in January after growth slowed due to weakness in Western economies ranging from the United States to Europe.
China also reported on Thursday that foreign direct investment in January dropped 0.3 percent from a year earlier, the third straight month of falls.
"The war of words between China and the United States has fallen into an old pattern suiting the needs of both countries' politics," said a dealer at a major European bank in Shanghai.
"It has no impact on trading," he said. "In the near term, China is unlikely to let the yuan stage a significant rise amid uncertainties in the global economy and its own."
Spot yuan was trading at 6.2997 versus the dollar at midday, compared with Wednesday's close of 6.3000 after the PBOC set the yuan's mid-point weaker at 6.2991 against Wednesday's 6.2958.
The PBOC set the mid-point at an all-time high of 6.2937 per dollar last Friday, guiding the yuan up to a record high of 6.2884 the same day, which markets construed as a goodwill gesture to the United States ahead of Xi's visit this week.
POLITICAL RHETORIC
US President Barack Obama kept up his attack on Chinese trade practices during a campaign-style visit on Wednesday to a Midwest factory, where his call to bring jobs back home was intended to resonate with voters in an election year.
Treasury Secretary Timothy Geithner also said on Wednesday that China was allowing its currency to gradually appreciate over the US dollar but said it had to move "more quickly."
In his turn, Chinese Vice President Xi Jinping said that steps taken by China to revalue its currency have helped cut its overall trade surplus and have boosted US exports to China.
The yuan has appreciated 31 percent since China shifted its rigid foreign exchange regime to a more flexible, managed floating system in 2005. That appreciation includes a 2.1 percent landmark revaluation on July 21, 2005.
But the yuan has actually fallen marginally since the start of this year as China's exports have slowed in line with global economic weakness amid the euro zone's debt crisis.
China's commerce ministry said on Thursday that it was working on detailed measures to support local exporters struggling to cope with weaker demand in major economies.
A ministry spokesman, however, added that January's fall in exports did not represent the real trend due to distortions caused by the Lunar New Year, which fell in January this year but was in February last year.
In the offshore non-deliverable forward (NDF) market, one-year NDFs implied yuan appreciation of 0.30 percent around midday on Thursday, virtually unchanged from 0.29 percent implied on Wednesday.
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