China pledges to hold its currency rate stable

China announced that it would resume making the yuan more flexible, signalling that it was ready to break a 23-month-old peg to the dollar that had come under intense international criticism.

But in a lengthy statement about how reform would proceed, the central bank explicitly ruled out a one-off revaluation, repeatedly said there was no basis for any big appreciation and added that the currency's value was not far off its fair level.

Lack of a real rise in the exchange rate would provide ammunition for critics, especially hawks in the US Congress, who say Beijing's actions will speak louder than its words and that penalties should be imposed if it keeps the yuan artificially cheap.

Leaders of the United States, the European Union, Japan and the International Monetary Fund, among others, welcomed its vow to deepen yuan reform as a hopeful contribution to the balancing of the world economy.

All eyes today will be on the daily reference rate set by the Chinese central bank to manage the yuan's value. Many economists believe that Beijing will nudge the exchange rate higher in increments, not leaps.

Global equity markets may rally as the news, coming a week before a G20 meeting in Canada, eases fears of a trade row between the United States and China at a delicate time for the world economy.