The yuan rose against the dollar for a third straight session on Tuesday after a think tank of China's Ministry of Commerce said the currency is undervalued and further appreciation is needed to help the economy. The yuan closed to 7.900 per dollar on Tuesday, up from 7.7918 on Monday.
China's central bank on Tuesday set its yuan mid-point at 7.7895 per dollar, the highest mid-point since the currency was revalued by 2.1 percent in July 2005. A currency dealer at a Chinese bank said the rising yuan mid-point was a signal that Beijing wants the yuan to appreciate faster.
"I feel it is a sign that regulators would like to get more deeply involved in setting the market pace. Previously, the yuan mid-point's guidance for the market was not as strong as today," the dealer said. The central bank could widen the yuan's daily fluctuation range, he said. Currently, the yuan may rise or fall 0.3 percent from its mid-point each day.
A report by the Chinese Academy of International Trade and Economic Cooperation, published on the Ministry of Commerce's Web site, said: "An undervalued yuan is just one reason for the imbalance of the domestic and external economy." This explicit acknowledgement contrasts with the ministry's long-standing concern about the impact of a stronger yuan on export-oriented jobs.
The report said China had to change the pattern of its trade and its model of economic growth, and yuan appreciation had an important part to play in that process.