China said on Wednesday that it will consider other major currencies in guiding the yuan, suggesting a departure from an effective dollar peg that has been in place since the middle of last year.
The reference to a new set of benchmarks for determining the value of the yuan holds out the possibility of a departure from recent practice, which has seen the currency held steady since mid-2008 around 6.83 per dollar.
This is the first time since the landmark revaluation and launching of forex reforms in July 2005 that the People's Bank of China has strayed from the language of keeping the yuan "basically stable at a reasonable and balanced level".
The comments come ahead of a visit to China next week by US President Barack Obama, and amid growing pressure from other countries for Beijing to be more flexible in how it handles the yuan in the face of dollar weakness.
Obama said on Monday that he will raise the issue of the yuan — a potentially disruptive topic for foreign exchange markets.
“Currency, along with a host of other issues, will come up, and I’m confident that both the United States and China can arrive at a broad set of policies that encourages trade that benefits both countries, that allows ongoing economic growth,” Obama told Reuters in an interview.
US manufacturers complain that Beijing artificially holds the value of the yuan down to make its exports cheaper, and American goods more expensive for Chinese consumers.
Economists say this has led to imbalances in the world economy by contributing to big trade deficits in the United States and trade surpluses in China. “That broader conversation will be at the center of our conversations with the Chinese delegation,” Obama said.