Yuan Falls as China Doesn’t Want Appreciation

The Chinese yuan declined at a fastest pace during the last two months as the country’s central bank lowered the reference exchange rate to stimulate the exporting industry.
The China’s yuan lost about 0.1 percent during one day today after the People’s Bank of China fixed the reference exchange rate of the yuan to the U.S. dollar at 6.8285 — down by 0.07 percent compared to the previous rate. China uses the regulated foreign exchange rate to keep the yuan from appreciating too fast and thus helps the domestic companies compete globally.
U.S. Treasury Secretary Timothy Geithner will start his visit to China on June 1. The aim of the visit is to discuss trading relations and Geithner will probably insist on the fast yuan’s appreciation. The previous visit of the Treasury Secretary (Henry Paulson at that time) was in early December 2008.
Analysts say that the latest downward reference rate change means that the monetary authorities in China don’t plan to float the yuan’s exchange rate and won’t allow its appreciation. The economic growth is still a priority for China after the slowest gain of GDP in almost ten years in the first quarter.
USD/CNY advanced from 6.8235 to 6.8307 as of 7:40 GMT today. The highest intraday rate was set near 6.8309.

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