China's yuan had the biggest gain since the end of a dollar link in July 2005
as the U.S. Treasury Department prepares to release a report that may increase
pressure for faster appreciation.
U.S. lawmakers plan to unveil legislation Wednesday to push China to
loosen controls on the yuan, hours after the Treasury publishes a semiannual
evaluation of exchange-rate manipulation.
"There is market speculation that China will let the yuan rise faster because
of the report on Wednesday," said Guo Zhaoyang, a foreign-exchange analyst at
China Everbright Bank in Guangzhou.
The yuan rose 0.26 percent to 7.6436 against the dollar at 5:30 p.m. in
Shanghai. The yuan, a denomination of China's currency, the renminbi, climbed
for the first day in four. It has gained 8.3 percent since China revalued the
currency and ended a decade-old link to the dollar in July 2005.
The currency held gains after a government report showed the inflation rate
accelerated to a more than two-year high in May. Government bonds declined, with
the benchmark 10-year yield rising 7 basis points, 0.07 percentage point, to
U.S. lawmakers accuse China of holding down the value of the yuan to spur
exports, contributing to a U.S. trade deficit with China.
New York Democrat Senator Charles Schumer will introduce legislation on June
13 that lays out U.S. responses when countries "including China unfairly
undervalue their currency," according to a press statement Monday by four
lawmakers in Washington.
China reiterated Tuesday that it does not manipulate its currency. "Whether
the renminbi is too high or low, this has to be determined by the markets and
not any one person or agency," Qin Gang, China's foreign ministry spokesman,
said in a regular briefing in Beijing.
The Treasury Department's semiannual report hasn't labeled any nation as
manipulating exchange rates since 1994.
"The division between Treasury as 'good cop' and Congress as 'bad cop' should
be self evident on Wednesday, when the Treasury rebukes China without naming her
as an exchange rate manipulator," Alan Ruskin, head of international strategy at
RBS Greenwich Capital Markets in Greenwich, Connecticut, wrote in a report.
U.S. legislators have criticized the Bush administration's strategy of
"long-term dialogue" with China for failing to stem the deficit. China said
Monday its trade surplus in May surged 73 percent from a year earlier.
There are now half a dozen measures before Congress, including proposals to
apply sanctions unless China allows the yuan to appreciate by 10 percent or
more. The bill probably won't include stringent measures such as unilateral
tariffs, though it still will go further than the Bush administration wants,
according to the Financial Times.
Schumer has said the new legislation will comply with international trade
rules and be "veto proof," according to Israel Klein, a spokesman for Congress's
Joint Economic Committee. He declined to elaborate. It takes a two-thirds vote
in the House and Senate to override a presidential veto.
Any attempt to levy a tariff on Chinese exports would be "a rash move that
leads only to a global trade war," said Guan Anping, Beijing-based trade lawyer
and former adviser to Vice Premier Wu. Tariffs will "hurt U.S. consumers,
raising their cost of living by 20 percent to 30 percent."