China has sole decision-making power on its exchange-rate policy and the yuan’s appreciation against the dollar in recent weeks has been driven by market demand, He Jianxiong, director- general of the People’s Bank of China’s international department, said in an interview in Mexico City yesterday.
“Ultimately, it’s the market that determines the yuan rate, and it is close to its equilibrium level,” He, formerly an International Monetary Fund Executive Director for China, said after the meeting of officials from the Group of 20. “The U.S. election won’t have much impact on the yuan level. China has a full power in making its own policy.”
Group of 20 finance chiefs pledged to move toward more flexible currency regimes in a statement issued yesterday that highlighted policy makers’ commitment to avoid competitive devaluations as global growth sours. The G-20 refrained from singling out China’s currency after it has risen 0.7 percent versus the dollar in the past month, the third-best performance among 25 most-actively traded emerging-market currencies. For the past three months, the yuan has gained 2 percent.
Twelve-month non-deliverable yuan forwards are trading 1.9 percent lower than the spot rate in Shanghai after the discount widened to 2 percent on Oct. 23, the biggest since 2009, on bets the currency’s appreciation will reverse following this week’s U.S. elections.
The weaker yuan forwards rate reflected “short-term price discrepancies in different markets,” He said.
U.S. presidential candidate Mitt Romney has said he will label China as a “currency manipulator” if elected. PBOC’s He declined to comment on Romney’s stance, saying “we don´t know who will win yet.”
The U.S. Treasury’s latest report on exchange-rate policies, issued May 25, said there is evidence the yuan “remains significantly undervalued” and further appreciation is warranted.
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