China to Loosen Exchange Rate

Attempting to defuse criticism of its currency policy ahead of a G-20 summit next weekend, Chinese officials announced Saturday that they would begin to allow their currency, the yuan, to have a more flexible exchange rate. Since mid-2008, the yuan has remained at an essentially stagnant rate pegged to the U.S. dollar, a move that helped China stabilize its economy during the economic crisis but has since drawn international criticism. Analysts say that pegging the yuan undervalues the currency, giving Chinese-made goods a competitive advantage in the international marketplace. President Obama and Treasury Secretary Timothy Geithner cautiously embraced the move, noting that the real impact of the announcement is yet to come. Geithner called it a "constructive step that can help safeguard recovery and contribute to a more balanced economy."