As they did in the past years, some lawmakers in the Congress vow that they
would introduce punitive legislation this year if Beijing does not take far more
concrete steps on currency and other issues, including opening up the country to
American banking and insurance services.
Paulson told the senators that he had tried to persuade China that it was in
its interest to achieve a flexible exchange rate, emphasizing that to keep its
currency high, the Chinese government must intervene aggressively in the
currency markets, buying huge numbers of dollars .
The yuan rose the most in more than five months
after Paulson defended China's policy of allowing gradual appreciation and
called for greater exchange-rate flexibility.
may be rewarding Paulson after he requested patience during the Senate
testimony, said Nizam Idris, a currency strategist at UBS AG. The People's Bank of
China set the highest daily reference rate since the government ended a fixed
exchange rate to the U.S. dollar in July 2005.
"Yuan gains could be China's way of reciprocating the lack of pressure from
Paulson," said Singapore-based Nizam. "China doesn't like to appreciate the yuan
under what is perceived as foreign pressure. They prefer to do it on their own
The yuan rose 0.15 percent to 7.7620 against the dollar as of 2:26 p.m. in
Shanghai, according to the China Foreign Exchange Trade System. The currency
climbed as much as 0.25 percent, the most since Aug. 17. It may reach 7.35 by
the year's end, Nizam said.
China may implement "big changes" to foreign-exchange policy this year
because of its trade surplus and excess cash in the banking system, China
Securities Journal said, citing unnamed sources. The trade surplus swelled 74
percent last year to a record $177.5 billion, sending foreign-exchange reserves
to $1.07 trillion and making it difficult for China to cool growth.