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Last Updated: Wednesday, 11 May, 2005, 14:54 GMT 15:54 UK
Yuan confusion rattles investors
Hands holding yuan notes
The US would like China's currency to reflect its economic strength
Conflicting statements about policy over China's currency, the yuan, have thrown investors into confusion.

The People's Daily newspaper, the mouthpiece of the state, said markets would revalue the yuan next week - but China's central bank denied the report.

The news came at a sensitive time: Chinese and US officials are meeting for trade talks in Washington.

The US would like China to allow the yuan to float freely, since it reckons the currency is undervalued.

The yuan has been pegged to the dollar at an exchange rate of about 8.28 yuan for 14 years, a rate which Washington says gives China an unfair edge in the export market.

There has been rampant speculation about the fate of the yuan during the past few weeks, as international pressure is building up on Beijing.

Call for change

US Treasury Secretary John Snow this week called for a revaluation of the yuan, saying "now is the time", but he declined to give a specific date.

There has been no policy change
Spokesman for the People's Bank of China

At its current level, China's goods are very inexpensive relative to American products - threatening US jobs and prompting US calls for the yuan to be revalued.

The People's Daily later said there had been a problem with the story which appeared in on online edition and had been a translation of a 7 May news agency story.

But China's central bank dismissed the report, saying: "There has been no policy change. Some mistakes occurred in the translation."

The agency report suggested the yuan would be worth 1.26% less in a month and about 6% less in a year.

"The People's Daily report is certainly more credible than most that we've had recently, but I'm still not convinced they are going to do it," said Adrian Foster, head of currency strategy at Dresdner Kleinwort Wasserstein.

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