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Yuan Rising

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NEW YORK, US – China is allowing its currency to fluctuate more widely against the dollar, a step toward meeting demands from the U.S. and Europe to reduce its trade surplus. The yuan rose as much as 0.24% today, the biggest gain since ending a peg to the dollar in July last year, a day after allowing the largest decline. The central bank on Aug. 9 said it would allow more “flexibility” in the one-year-old system, which allows the yuan to float with reference to currencies of leading trading partners.

Yuan Rising

NEW YORK, US – China is allowing its currency to fluctuate more widely against the dollar, a step toward meeting demands from the U.S. and Europe to reduce its trade surplus. The yuan rose as much as 0.24% today, the biggest gain since ending a peg to the dollar in July last year, a day after allowing the largest decline. The central bank on Aug. 9 said it would allow more “flexibility” in the one-year-old system, which allows the yuan to float with reference to currencies of leading trading partners. All but three of 15 leading Asian currencies climbed today.
 
Allowing larger swings would help ease tensions with governments abroad as long as it results in a stronger yuan, which has advanced only 1.5 % against the dollar since the currencies were de-linked. Lawmakers in the U.S. blame exchange- rate manipulation for a flood of cheap Chinese imports, lost manufacturing jobs and the nation’s record trade deficit.
 
“China is indeed loosening control and allowing the yuan to move in line with other currencies,” said Hideki Hayashi, a foreign-exchange strategist in Tokyo at Shinko Securities Co., a unit of Japan’s second-largest lender by assets. “The yuan will gradually strengthen.”
 
The yuan fell as much as 0.29 percent yesterday, more than four times the size of any fluctuation last year after the central bank ditched the dollar-peg on July 21, 2005.
 
 

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