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China signals end to yuan’s two-year peg to dollar

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China said it will allow a more flexible yuan, signaling an end to the currency’s two-year-old peg to the dollar a week before a Group of 20 summit.

The decision was made after the world’s third-largest economy improved, the central bank said in a statement on its website, without indicating a timeframe for the change. It ruled out a one-time revaluation, saying there is no basis for “large-scale appreciation.”

The move may help deflect criticism from President Barack Obama and other G-20 leaders, who have blamed China for relying on an undervalued currency to promote exports. It also affirms Treasury Secretary Timothy F. Geithner’s policy of encouraging China to loosen restrictions on the yuan while resisting calls in Congress for trade sanctions. Geithner in April delayed a report to lawmakers assessing whether China or any other country is unfairly manipulating its exchange rate.

Full story: China Signals End to Yuan’s Two-Year Peg to Dollar (Update1) – Bloomberg.com