Chinese Yuan Comes Under Pressure In Congress, Paulson To Demand Flexibility

- Chinese Yuan Comes Under Pressure In Congress, Paulson To Demand Flexibility

- China Stock Market Continues Higher, Traders Disregard Warnings

  • [B]Asia[/B][B]n  St[/B][B]ocks Move Higher In  Tandem[/B]

Congress Hears Currency Manipulation Complaints
In the spirit of Chinese yuan focus, and likely to skew talks heading into the end of the month, the currency came under severe pressure in the New York afternoon as US industry and labor heads took complaints to Congressional leaders. Attending a hearing in the House of Representatives, auto industry officials complained about an artificially low Japanese yen, offering Asian exporters a price advantage compared to US exported goods. Subsequently, a US treasury official cited that Washington leaders will continue to press China to move faster on allowing its currency to float freely as it still maintains a relative hold on the currency. As a result, with the day?s theme as blatant “currency manipulation”, the Chinese yuan continued to test higher on speculation that further flexibility will be given to the currency in light of the immense pressure that has emerged over the last month. The Chinese yuan traded through the 7.7000 figure once again, rising to 7.6978 in the overnight.

Chinese Yuan Under Pressure, Paulson Likely To Demand Flexibility
More statements were released within the world?s fastest growing economy as notable domestic resources recormmended further flexibility in the Chinese yuan. According to a Xinhua News Agency report, a government research arm recommended a looser policy when it came to foreign exchange controls. The source noted that widening the current trading band on the curreny would “appropriately” help government officials in preventing an overheating of the economy. Subsequently, Zhao Tao, deputy secretary general of the Central Policy Research Office stated that thegovernment should consider removing “unreasonable policies” that support exporters and inflate the overall trade surplus. Ultimately, the government would need to further tighten control of liquidity management and money supply in order to keep things in check, as officials have zealousy attempted in the past couple of quarters.

Shanghai Continues to Run Higher, Sets Another Record Close
Breaking the record setting session yesterday, China?s Shanghai stock market rose to another record after recommendations were made to the government to loosen exchange rate controls. As a result, intraday speculation helped to boost lenders and developers in the index, supporting a move higher to a 3,701.28 close for the day. The benchmark CSI 300 added 15.25 points or 0.4 percent to advance to the highest mark since the index was introduced in 2005. According to the State Information Center, the research arm of the National Development and Reform Commission, the Chinese government should allow the yuan to be more flexible against the current basket of currencies. The comments echo recent pledges by domestic policy makers as well as US congressmen, for obviously different reasons, in recent months. Incidentally, an appreciated yuan would subsequently boost property and asset values while helping to alleviate inflationary pressures.

Asian Stocks Advance Higher Through Close
Hong Kong stocks advanced on the day, rising after reports that Hutchison Telecommunications International Ltd. turned a profit in the first quarter and Hong Kong Exchanges & Clearing Ltd. doubled quarterly profit. Both companies? reports lent to optimism as similar reports are expected for additional regional sectors. As a result, the Hang Seng index added 138.43 points to 20,844.78. Simultaneously, shares in Singapore finished higher as Oversea Chinese Banking Corp stated first quarter profit that doubled. Beating analysts? estimates, profit in the three months rose to S$647 million on the sale of office property and higher fee income stemming from its insurance business. Oversea Chinese shares added 10 cents to close at S$9.50. Subsequently, the news boosted sector stocks and the overall market, helping the Straits Times Index to add 13.51 points to close at 3,452.72.