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China continues with its pledge of yuan flexibility

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by Kay Mitchell

The People’s Bank of China has today set its currency at 6.7896 yuan to the US dollar – which is 0.3% stronger than Thursday’s level of 6.8100.

The moves come as China pledged to “strengthen the flexibility” of the yuan exchange rate ahead of this weekend’s G20 summit in Canada.

The level marks the strongest since China removed the currency peg in July 2005 when the yuan was allowed to rise in value by about one fifth.

However, the peg was reinstated in July 2008 when the global financial crisis took hold, amid US concerns of the impact on trade.

US legislators and trade groups have since argued that the yuan is kept up to 40% below what its value should be against the US dollar.

The US has also expressed dissatisfaction that China is keeping the value of the yuan low to help its exporters at the expense of overseas competitors.

Earlier this month, the World Bank joined other commentators by saying that the yuan, which is also referred to as the renminbi, should be strengthened against other international currencies, in order to ease inflation and prevent the economy from overheating.

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News posted: June 25, 2010

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