Heat off, China fixes parity rate lower
18 Oct 2010
Beijing: It doesn't take long for the People's Bank of China (PBOC) to revert to its old tricks the moment the heat's off. With the US Treasury Department once again deferring presentation of a currency report intended to state whether or not China was manipulating its currency, PBOC set the yuan's central parity rate lower at 6.6541 against the US dollar on Monday, compared to the record high of 6.6497 set last Friday.
Incidentally, Friday, 15 October, was when the long delayed Treasury report was due. Ultimately, the Treasury Department cried off from declaring China to be a confirmed offender, instead stating that it "recognizes" China's recent efforts to let its currency appreciate.
It was then made evident that the Treasury will delay the currency manipulators report until after multilateral talks at the G-20 Summit held in Korea next month.
The report is important for an endorsement of China as a currency manipulator would allow the US administration to impose tariffs on Chinese goods, amongst other actions. It would also herald the onset of a full-scale trade war.
The PBOC has been setting the daily parity at a record high against the dollar for 15 of the last 20 trading days, even as international pressure has continued to mount on Beijing to speed up appreciation.
The IMF has stated that China's currency is significantly undervalued.
