The yuan traded near a two-week high after 30 U.S. senators sent a letter to Chinese Vice Premier Wang Qishan calling for faster currency gains.
The lawmakers said they want China to allow “its currency to appreciate meaningfully” before President Hu Jintao visits Washington next month, warning the U.S. Senate may support legislation passed by the House of Representatives that would let American companies petition for higher duties on Chinese imports. The People’s Bank of China set the reference rate for yuan trading lower for the first time in four days at 6.6565 per dollar, a 0.08 percent drop from yesterday.
“The rise today is a knee-jerk reaction after the lawmakers’ call for the yuan to strengthen,” said Emmanuel Ng, a currency strategist in Singapore at Oversea-Chinese Banking Corp. “It would still have to be legislated and that could be miles away; that’s if it even sees the light of day.”
The yuan advanced 0.06 percent to 6.6446 per dollar as of 5:30 p.m. in Shanghai, according to the China Foreign Exchange Trade System. It earlier touched 6.6450, the strongest level since Nov. 23.
Twelve-month non-deliverable forwards rose 0.15 percent to 6.4958, reflecting bets the currency will strengthen 2.2 percent in a year, according to data compiled by Bloomberg.
“Risk appetite is still fairly stable though, despite the European debt crisis threatening to boil over,” Ng added.
Germany rejected calls yesterday to increase the European Union’s $1 trillion bailout fund or introduce joint bond sales, signaling its refusal to bear extra costs to stamp out the debt crisis in the region. German Chancellor Angela Merkel rejected pleas from Belgium and central bankers to bolster the fund that would save countries like Portugal and Spain from falling prey to speculation.