Yen slides as China sticks to its guns

The yen fell sharply on Tuesday as lingering hopes that China would revalue the renminbi to coincide with the forthcoming G7 conference finally appeared to bite the dust.
The market took to heart the words of Li Deshui, head of China’s National Bureau of Statistics, who said: “China doesn’t have conditions to adjust the renminbi exchange rate at present. We need a good and feasible plan and formulating such a plan needs time.”
The comments lessened the likelihood of China injecting more flexibility into the renminbi, which has been fixed at Rmb8.278 against the dollar for a decade, despite repeated calls from US and eurozone politicians for it to do so.
John Snow, the US Treasury secretary, added to perceptions that nothing concrete will be achieved at the G7 meeting in London on February 4-5, saying he expected “no change in foreign exchange language”.
As a result, official Asian demand for dollars is likely to remain strong, the rating agency concluded.
The Canadian dollar slumped 1.1 per cent to C$1.2375 against its southern neighbour as the Bank of Canada, which held interest rates at 2.5 per cent, as expected, cited currency strength as the principal reason for weaker-than-expected growth. Since May 2004 the Loonie has risen 11.7 per cent against the greenback.
The US dollar’s gains against the yen and Loonie were seen as the spark for a broader rally which saw the greenback firm 0.6 per cent to $1.2952 against the euro and 0.8 per cent to $1.8642 versus sterling.