China's currency surged Friday to its highest level yet, with central bank setting the daily official level at 6.7896 yuan to the dollar, acting on a pledge to allow greater flexibility in the exchange rate ahead of a weekend G-20 summit.
The rate set by the People's Bank of China was 0.3 percent stronger than Thursday's rate of 6.8100, well within the daily 0.5 percent limit that the currency is allowed to move in. The rate — known as the central parity rate — is a weighted average of prices given by market makers, excluding highest and lowest offers.
By midday, the yuan was trading at about 6.7937 to the dollar in the spot market, after dipping to 6.7869.
Beijing's pledge to let the currency fluctuate more after keeping it pegged near 6.83 for the past two years was welcomed by many of China's trading partners, given concerns that the yuan's level may be undervalued and thus distorting trade by making Chinese exports artificially cheap in dollar terms.
The move to loosen the exchange rate was expected to ease U.S. concerns ahead of this weekend's summit of the Group of 20 leading economies.
However, President Barack Obama said Thursday that it is too early to tell whether the greater flexibility promised by Beijing will be sufficient over the long-run. He said that while the initial signs were positive, the U.S. will watch the trajectory of the yuan over the course of the year.
Obama says a more flexible yuan would be good for China, the U.S., and the entire world economy. He is expected to raise the currency issues in talks with Chinese officials in Canada at the G-20.
China has chafed at such pressure, saying its currency is at about the right level and that trade imbalances stem from other fundamental problems with the U.S. and other western economies.
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