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The Chinese regime could loosen its tight grip on the yuan and allow it to fluctuate more, but that could also mean its value goes down, according the Chinese leader Wen Jiabao in Bali. The Chinese regime has long been criticized for undervaluing its currency to give exporters an unfair advantage, but Wen said recent forward markets had showed some expectations of a decrease in the yuan's value.
The Chinese regime plans to increase fluctuation in the value of its currency, but those holding out for significant appreciation may have to wait.
Chinese state media reported that on the sidelines of a regional summit held in Bali, Chinese leader Wen Jiabao told US president Barack Obama that China was going to "strengthen the yuan's trading flexibility in either direction."
He reportedly said a looser yuan might not always increase in value, with recent forwards markets actually reducing its value to the bottom end of its fixed trading band.
The China Central Bank only allows the yuan to fluctuate within a trading band of 0.5 percent either side of a fixed daily rate.
However White House officials said US President Obama had reiterated US concerns that the yuan was under-valued.
The move could suggest the Chinese regime is trying to water down criticisms of its currency policy that has been blamed for a trading imbalance with other countries. The reports quote Wen as saying recent downward fluctuations "could not have been engineered."
Reuters reports some analysts are speculating the Central Bank could widen the yuan's daily trading band, while others believe the regime will only loosen its currency when it is less likely to appreciate, which could be a long time away.