No When From Wen On The RMB

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As trade tensions mount ahead of the China-US Strategic Economic Dialogue in Washington on 22-24 May, Premier Wen Jiabao has announced (at the African Development Bank forum in Shanghai) that:

    “China will gradually increase the flexibility of its currency regime…We’ll take a number of measures to strengthen our control of the economy and to boost domestic consumption.”

What will be done, and when, remain unclear. But the profile given to the issues is a clear message for the US, and comes on the back of more strong trade surplus growth. Bloomberg notes that the RMB has already been on the move:

    “The yuan last week climbed the most since a decade-long link to the dollar was scrapped in July 2005, which may help U.S. Secretary Henry Paulson argue he’s making progress with China, as some lawmakers call for sanctions unless they see faster gains…The yuan has appreciated 1.6 percent [against the US dollar] this year.”

This gradual approach is expected to continue, and it would not surprise greatly if further moves are timed to try and take US anger off the boil.

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