Reuters: US Dollar Report: UPDATE 2-US says China not seeking trade edge with weak yuan

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UPDATE 2-US says China not seeking trade edge with weak yuan May 25th 2012, 14:20 Fri May 25, 2012 10:20am EDT * U.S. says yuan "significantly undervalued" * U.S. says will press Beijing for further FX steps By Jason Lange WASHINGTON, May 25 (Reuters) - The United States ruled on Friday that China was not manipulating its currency to gain an unfair trade advantage but it called the yuan "significantly undervalued" and vowed to press the Asian power for currency reforms. Many U.S. lawmakers argue China has gained a competitive edge over American manufacturers by keeping the yuan weak to boost exports, and Republican presidential hopeful Mitt Romney has vowed to slap a "currency manipulator" label on China from his first day in office if he wins the White House. But the Obama administration said in a semiannual report that labeling China a currency manipulator under U.S. law was not warranted, citing a rise in the yuan against the dollar, a drop in China's trade surplus and commitments Beijing has made to further currency reforms. Still, the U.S. Treasury said China needed to take further steps to let the yuan, also known as the renmimbi or RMB, rise in value. "Available evidence suggests the RMB remains significantly undervalued," the Treasury said in a statement accompanying the report to Congress. It said it would "press for policy changes that yield greater exchange rate flexibility." "We believe further appreciation of the RMB against the dollar and other major currencies is warranted," it said. The yuan has appreciated 8 percent against the dollar since June 2010 when China took its currency off a firm peg with the dollar but has been "virtually flat" in 2012, the Treasury said. Labeling China a currency manipulator would be largely a symbolic move. Under U.S. law, it would only require Washington to open discussions with Beijing on adjusting the yuan's value - a process that is already under way and showing progress. It has been 18 years since the U.S. Treasury has designated any country a currency manipulator. China was named five times from May 1992 to July 1994. For most of that time, it operated with two exchange rates, but it unified the dual rate in January 1994 as part of reforms to embrace a "socialist market economy." The U.S. Senate last year for the first time passed a bill that would have required the administration to slap penalties on Chinese imports if Beijing failed to adopt market-based exchange rates. However, the House took no action and the legislation died. Link this Share this Digg this Email Reprints

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