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US says ‘too early to judge’ China currency devaluation

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Washington: The United States said it would be premature to assess China’s surprise yuan devaluation today, warning than any reversal in Chinese reforms would be “troubling”.

In the first reaction from the Obama administration to the People’s Bank of China’s nearly 2.0 percent cut in the yuan’s reference rate to the dollar, the Treasury said it had pressed China for a more flexible exchange rate that reflects the market.

“While it is too early to judge the full implications of the change in the PBOC reference rate, China has indicated that the changes announced today are another step in its move to a more market-determined exchange rate,” the Treasury said in a brief statement.

“Any reversal in reforms would be a troubling development.”

The Treasury said it would continue to monitor how the changes are implemented and to press China on the pace of reform.

This includes additional measures to transition to a market-oriented exchange rate and “its stated desire to move towards an economy that is more dependent on domestic demand, which is in China and America’s best interests.”

US officials have long accused the Chinese government of keeping the currency, also known as the renminbi, undervalued to make Chinese exports cheaper and gain an unfair trade advantage.

The massive US goods trade deficit with China exceeded USD 31 billion in June. The sharp depreciation of the yuan Tuesday could widen that politically sensitive gap.