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UPDATE: China Yuan Flat As Premier Suggests No Policy Change

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littlekracker


* MARCH 5, 2010, 5:00 A.M. ET

UPDATE: China Yuan Flat As Premier Suggests No Policy Change


(Adds closing level.)

Vs Parity Pvs
USD/CNY Central Parity 6.8266 6.8265
USD/CNY OTC 0930 GMT 6.8265 0.00% 6.8264
High 6.8269 0.00%
Low 6.8263 0.00%


SHANGHAI (Dow Jones)--China's yuan was steady against the U.S. dollar Friday after Chinese Premier Wen Jiabao's remarks on the country's exchange-rate policy suggested Beijing will likely keep its currency stable in the near term.

On the over-the-counter market, the dollar was at CNY6.8265 at 0930 GMT, almost unchanged from CNY6.8264 late Thursday. It traded in a narrow range of CNY6.8263 to CNY6.8269. Offshore, one-year dollar-yuan nondeliverable forwards were at 6.6500/6.6550, down from 6.6550/6.6600 late Thursday.

"We will continue to improve the mechanism for setting the renminbi exchange rate and keep it basically stable at an appropriate and balanced level," Wen said, using the other name for the yuan, while delivering the government work report during the National People's Congress.

A Shanghai-based dealer at a foreign bank said: "The wording of the exchange rate issue, which is similar to last year, indicates China doesn't want high volatility in the yuan."

"Since there's no clear sign of rising inflation, the government is unlikely to let the yuan rise in the short term," he said.

China's central bank set the dollar-yuan central rate at 6.8266, up marginally from 6.8265 Thursday. The fixing was kept between 6.8265 and 6.8268 this week.

The appreciation in the yuan has stalled since mid-2008, when the deepening global financial crisis severely hit China's export sector, a major engine of its economy.

The turnaround in China's exports in recent months has led to mounting calls from the U.S. and Europe for Beijing to revalue its currency.

The Organization for Economic Cooperation and Development last month urged China to make the yuan exchange rate more flexible.

In a meeting with Senate Democrats in February, U.S. President Barack Obama vowed to "get much tougher" with China on trade rules, including currency rates, to ensure that U.S. goods aren't at a competitive disadvantage.

Some economists also believe the yuan will resume an upward trend as early as the second quarter.

"We believe the yuan policy will become an increasingly important instrument for normalizing overall monetary conditions," said JP Morgan economist Qian Wang. "We expect gradual yuan appreciation to resume in the second quarter, with the dollar-yuan exchange rate to reach 6.5 by the end of this year," she said.

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