China's central bank set the strongest yuan exchange rate in years today, as international pressure builds for a stronger currency ahead of the weekend Group of 20 summit in Canada.
The People's Bank of China said it set the central parity rate, the centre point of the currency's allowed trading band, at 6.7896 to the dollar, 0.3 per cent stronger than yesterday's 6.8100.
The figure marks the strongest level since China freed the currency from an 11-year-old peg in July 2005 and moved to a tightly managed floating exchange rate.
During trading today, the yuan strengthened to 6.7856 on the China's main foreign exchange market before closing slightly weaker at 6.7900, Dow Jones Newswires said.
The currency has appreciated 0.53 per cent against the greenback over the week.
"Today's trading is quite balanced, there were no especially large buys and sales were not very heavy either," a Beijing-based forex trader told AFP.
China has tweaked the rate up and down this week ahead of the G20 summit and has a history of letting the yuan strengthen slightly before sensitive events, apparently to defuse criticism that it keeps the currency too low.
Policy makers pledged last weekend to let the yuan trade more freely against the dollar but ruled out dramatic moves in the currency or a one-off appreciation.
In a vaguely worded statement, the central bank said the yuan would remain "basically stable", official code for keeping the currency on a tight leash.
The action was widely seen as a bid to head off rancour at the G20 meeting following intense pressure on Beijing to embrace currency reform as part of efforts to enhance a global economic recovery.
US President Barack Obama said yesterday it was too early to determine the impact of China's limited currency reform although he viewed the move as "positive."
