Yuan rises further against dollar encouraged
A top U.S. Treasury official encouraged China on Tuesday to do more to let the yuan rise further against the dollar.
"We take Governor Zhou and other officials at their word that further adjustments are coming," U.S. Treasury Undersecretary for International Affairs Timothy Adams said during a visit to Japan. "I applaud his comments from yesterday and we'll continue to monitor the situation very closely."
In an interview with the Financial Times that appeared Monday, Zhou Xiaochuan, governor of the People's Bank of China, said the currency "has started to float and over time market forces will play a more and more important role."
On July 21, China announced it was revaluing its currency 2.1 percent higher against the U.S. dollar, a move long awaited by the White House. The Bush administration had accused China of keeping the yuan artificially low, giving China's exports an unfair trade advantage against the U.S.
But U.S. manufacturers and some members of Congress argue that the yuan's revaluation to 8.11 per U.S. dollar from the previous 8.27 was not a big enough move. They want China to let the yuan rise further against the dollar.
In recent days, there has been increasing speculation in currency markets that China may allow the yuan to rise further ahead of Chinese President Hu Jintao's first state visit to the United States on September 7.
Asked whether China's recent actions on its currency regime would prevent the country from being named a currency manipulator when the U.S. Treasury issues its next foreign exchange report in October, Adams highlighted the importance of China's moves.
"I'm not going to foreshadow the FX report. It hasn't been written, but the change in the exchange rate system after a 10-year period, the reform of the system is in and of itself a significant event, but there is an assumption in that reform that there will be additional liberalization over time as the Chinese work toward their stated goal, which is a full float of the currency," Adams said.
The U.S. Treasury warned China in its May currency report that if current trends persisted "without substantial alteration," it was on track to label China a currency manipulator in its next report this October.