China's central bank on Wednesday promised to let market supply and demand play a "fundamental role" in determining the level of the renminbi.

As if to demonstrate just such a laissez-faire attitude, outlined in the quarterly monetary policy report from the People's Bank of China, the renminbi on Wednesday rose 0.2 per cent to Rmb8.0175 to the dollar.

The move came a day after Hank Paulson, a sinophile, was named the next US Treasury secretary.

Mr Paulson's battle to encourage Beijing to allow the renminbi to strengthen at a faster pace to help ameliorate global economic imbalances is likely to be long and hard.

"It is not surprising that the market finds some linkage in these events and may even assume it implies a faster pace of appreciation," said David Bloom, currency analyst at HSBC. "We would not view it that way. The PBoC report was a scheduled release and not a special announcement related to Mr Paulson's nomination.

Wednesday's renminbi rise was less profound than it appeared at first glance. It had fallen to a nine-week low against the dollar on Tuesday, and May was the first month since the renminbi's 2.1 per cent revaluation last July that it had declined. "The rise in the renminbi should be viewed in the context of its recent declines," said Mr Bloom.

Encouraging Beijing, and the rest of emerging Asia, to allow greater currency flexibility is likely to be a main objective for Mr Paulson.

Dollar weakness against Asian currencies is considered by many observers as essential to reducing Washington's $200bn a year bilateral trade deficit with China (according to US data) and a US trade deficit of 7 per cent of gross domestic product.

Few people in the market believe the appointment of Mr Paulson, chairman and chief executive of Goldman Sachs, is a coincidence, given his extensive links with China. He has visited the country about 70 times.

The PBoC's report promised "innovative steps" to bring China's balance of payments surplus into equilibrium and said the frequency and degree of its intervention "will continue to diminish, and gradually dwindle".

Yet the report also said that China would keep its currency "basically stable", and the forwards market was little moved, pricing in a rate of Rmb7.7155 to the dollar in 12 months' time.

"It's pretty much what they have said in the past," said Derek Halpenny, senior currency economist at Bank of Tokyo-Mitsubishi UFJ.