A backtracking by China in its commitment to move toward a market-determined exchange rate for the yuan would provoke serious concern in the Obama administration, a U.S. Treasury official said.
China allowed the yuan to depreciate before widening the exchange-rate band on March 17. The changes occurred as China continued to build current-account surpluses, accumulate excessive foreign reserves and attract significant net foreign-direct investment, the official said today on condition of anonymity.
Since the start of this year, the People’s Bank of China has guided a 2.5 percent loss on the yuan to help curb speculative bets on appreciation of the currency, according to Nomura Holdings Inc.
The U.S. will continue to work with other countries to impose additional costs on Russia if President Vladimir Putin’s government takes further action in violation of Ukraine’s sovereignty and territorial integrity, the official said, speaking before meetings in Washington this weekend of global finance officials.
The U.S. is advocating a diplomatic solution and de-escalation of the crisis in Ukraine, the official said, warning that further escalation could be disruptive to the global economy.
Europe needs to take further steps to fight low inflation and support demand, said the official, calling countries with current account surplus to step up domestic demand.
The Treasury official urged Japan not to cut its fiscal deficit too quickly, and said the world’s third-largest economy needs to implement structural changes to boost domestic demand.
The rejection by the U.S. Congress of legislation that would boost the International Monetary Fund’s resources seriously limits the tools the Obama administration can use to lead the global response to the Ukraine crisis, the official said. The administration will work with lawmakers to try to win approval for the funding this year, the official said.
Finance ministers and central bankers are gathering this week in Washington for the spring meetings of the IMF and World Bank.