Is China resuming yuan appreciation?

08:17, April 09, 2010      

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China's currency made headlines Thursday amid increased speculation the government will resume its appreciation, but analysts said it is too early to make such a conclusion.

The central parity rate of the yuan, China's currency, also known as the renminbi (RMB), was unchanged from the previous day's 6.8259 per U.S. dollar on Thursday, the lowest since May 2009, according to the China Foreign Exchange Trading System.

The strengthening of yuan was interpreted as a signal that China was about to resume yuan appreciation, after the U.S. Treasury Department announced it would delay the publication of a report that may have labeled China a "currency manipulator."

However, it was still too early and arbitrary to make such a judgment based on several days' observation of the yuan's movement, said Zuo Xiaolei, an economist with the Beijing-based Galaxy Securities.

Allowing the yuan to appreciate against the U.S. dollar without reforming the exchange rate formation mechanism would be "a disaster" for China, but reforming the mechanism does not mean allowing the yuan to appreciate, Zuo said.

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