The yuan weakened before the visit of Chinese President Hu Jintao to Washington

The yuan weakened before the visit of Chinese President Hu Jintao to Washington next month, trading currency forward contracts shows, angering U.S. senators it says it can return trade sanctions unless there is profit.

The currency fell 0.2 percent to 6.6599 per dollar since 06 December, when 30 senators sent a letter to Chinese Vice Premier Wang Qishan, calling for the yuan to "appreciate significantly" before Hu's trip. Forwards traders are betting on a decline of 0.07 percent in the next month. U.S. President Barack Obama has met for talks with Chinese leaders on two occasions from two years of currency parity is relaxed in June. Yuan gains of 0.6 percent or more were recorded in the previous month each time.

"It is impossible for China to accede to calls," said Lu Zhengwei, an economist at Industrial Bank Co. in Shanghai. "The authorities seem to take into account the pace of appreciation since June, the maxim that the economy can support. Faster gains would create too many difficulties for exporters."

The yuan is the best performance among the currencies of BRIC countries in the last decade and trade ministry spokesman Yao Jian, said this month that export controls are a key U.S. trade imbalance between the two countries. U.S. data show that the trade gap with China rose to 227 billion U.S. dollars in the first 10 months of this year, more than the deficit with trading partners next seven largest combined.

U.S. lawmakers, including Sen. Charles Schumer, a Democrat from New York, say that a weak yuan is one of the reasons for the trade deficit and have pressed China to let its currency rise. The House of Representatives in September passed a law allowing U.S. companies denounces the imposition of duties on Chinese imports to offset the effect of a weaker yuan.

Best of BRIC

Chinese Commerce Minister Chen Deming said that the nation is committed to "balance" the foreign trade through the stabilization of exports and increase imports in the next five years, the China Daily reported Dec. 17. Exports rose 33 percent from the previous year in the last 11 months, while imports rose 40 percent, customs statistics show office.

The yuan has strengthened 24 percent against the dollar in the last decade, surpassing the 15 percent gains of the Brazilian real, 3.3 percent in the rupee in India and a 9 percent drop in the ruble Russia. The yuan, real and every rupee appreciated less than 3 percent this year, while the ruble weakened 2.6 percent.

Yuan rises

China's currency is now 0.2 percent stronger at 16:09 from Shanghai, is recovering from its biggest drop in six weeks as easing tensions on the Korean peninsula increased investor confidence. U.S. Dollar Index, an indicator of the strength of the currency, declined 0.4 percent, after yesterday hit its highest level in more than two weeks.

The government bond yield 3.67 percent, due in October 2020 fell 2 basis points, or 0.02 percentage point to 3.77 percent, according to the price of National Interbank Funding Center.

Swaps credit-default linked to China's sovereign debt for five years, yesterday rose 4 basis points to 72, according to CMA prices. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent of a government or a company fail to adhere to its debt agreements.

International Monetary Fund Dominique Strauss-Kahn said on December 17 calling for an immediate revaluation of the yuan is "probably wrong." A sudden movement would be "worrying" for China and the world economy, he said.

Shares of China

The Shanghai Composite Index of shares has fallen 3.3 percent since the central bank raised its benchmark interest rate on 19 October for the first time since 2007, trying to tame the fastest inflation in two years.

Policy makers driven relationships lace-banks for the sixth time in 2010 this month, causing a contraction in cash that led to the benchmark money market rate up to 30 months of 4.08 for percent today. The repo rate rose seven-day 54 basis points, or 0.54 percentage point.

The People's Bank of China scrapped a dollar link two years of June 19 and allowed the yuan to rise by 2.3 percent, a rate of profit U.S. ambassador in China, Jon Huntsman said that 18 December is "painfully slow." Obama said in November 1912 in Seoul, a day after his talks with Hu Finally, the yuan was "undervalued" and he hopes that "progress in this issue. "

The yuan appreciated 0.6 percent in the month before that meeting, which was at the G20 summit in the capital of South Korea. There was a 1.4 percent advance the month before Obama discussed monetary policy with Prime Minister Wen Jiabao in New York on 23 September.

"Milestones"

"Judging by what has happened to the yuan ahead of some major events, I think there may be some recognition evident before the state visit next month," said Zhang Ming, deputy director of Beijing-based International Bureau Research in Finance from the State-supported China Academy of Social Sciences. "But it was not a smart strategy because speculators take advantage of a regular pattern."

The yuan may rise 5 percent to 6 percent next year against the dollar because the government must protect the interests of exporters, while seeking to contain imported inflation, said Zhang CASS.
Forwards

Delivery term bets reflect percent appreciation from 2 to 6.5455 per dollar next year, below the 2.9 percent gain expected when Obama and Hu met in Seoul. Forwards are agreements to buy and sell assets at current prices for delivery at a specified date. Non-deliverable contracts are settled in dollars because the yuan is not fully convertible.

The exchange rates tend to be overshadowed by the risk of conflict between North and South Korea during next month's talks between Hu and Obama, said Sergio Dergachev, who helps manage the equivalent of $ 8.5 billion in debt markets emerging of Union Investment in Frankfurt.

Defense Ministry of South Korea, said a live fire drill yesterday Yeonpyeong Island that drew threats of retaliation from the North was completed without incident. artillery positions on the island, near a disputed maritime border, were bombed after a similar exercise last month.

"Hu's visit to the U.S. diplomatically important, but the issues surrounding the Korean peninsula is more acute" than monetary, Dergachev said. "Hopefully in the next month without real changes in the exchange rate of the yuan."