China's currency, the yuan, hit a post-revaluation high against the U.S. dollar Monday after the People's Bank of China set the yuan's reference rate for trading against the dollar at its highest level since the central bank began publishing the daily fix in 1994, The Wall Street Journal reports. The yuan can rise or fall 0.5% each day from the reference or mid-point.
Meanwhile, the U.S. stepped up pressure on China to let the yuan rise further, with Treasury Secretary Timothy Geithner saying in an interview with The Wall Street Journal that while China signaled in June it was going to let the exchange rate better reflect market forces, "they've done very, very little, they've let it move very, very little in the interim."
The People's Bank set the mid-point at 6.7509 on Monday, Reuters reported, up from Friday's 6.7625, guiding spot yuan to trade at 6.7616 at midday on Monday after touching a post-revaluation high of 6.7568, up from Friday's close of 6.7692. The yuan, also called the renminbi, is now up 0.96% since China eliminated the two-year peg to the dollar.
Some traders see the People's Bank of China's move as a gesture of goodwill, coming as it does days before U.S. lawmakers meet to address the issue of China's currency policy and consider a more punitive response to what many see as its unfair currency manipulation. Others see it as a precursor for a new period of yuan appreciation, although without other supports such as export strength and rising inflation, the trend may not be sustainable.
However, such supports may already be in place: China's industrial production rose 13.9% in August from a year before, Bloomberg reported, the most in three months, and retail sales and lending figures topped economists' estimates. Imports also accelerated, another sign that Chinese growth is picking up after a second-quarter moderation.
Such evidence of strengthening domestic spending in China undermines the case for Beijing to resist a faster pace of currency appreciation days, economists say.