Chinese premier Wen Jiabao has vowed to keep the yuan exchange rate stable in the coming months, citing a concern for international economic and financial stability, reported China Daily. The promise was repeated by the People's Bank of China (PBOC), the country's central bank. The US, Japan and South Korea have called on China to let the yuan appreciate, saying that the currency is undervalued, making Chinese exports cheaper as the US dollar – to which the currency is pegged – weakens.
The central bank has admitted that upward pressure on the yuan would rise further for the remainder of the year as the slow recovery of the world economy could tempt countries subject to cheap Chinese exports towards trade protectionism. In the short term, the PBOC has been scaling up its purchases of US dollars to keep the yuan within its usual trading band of 8.276 to 8.280. In the medium term, the Chinese government has said that it will improve the rate-forming mechanism and will allow the yuan to float in a broader range.