There has been quite a flurry of excitement in Hong Kong's foreign exchange market over the last few weeks. Sadly, it is misplaced. The cause of this unseasonable excitement has been a sudden upward spurt in the value of the yuan as the mainland authorities have allowed the currency to strengthen by almost a full percentage point against the US dollar in just 10 days. That might not sound like much to get worked up about. The Japanese yen often moves by as much in a single day. For the yuan, however, one per cent is a big deal. Before this month's move the currency had only climbed by two per cent against the US dollar over the entire first seven months of the year (see the first chart). So traders and analysts are reading a lot into the latest move. Many say it presages a widening of the yuan's permitted trading range, and that the authorities are preparing to allow a greater degree of yuan volatility as the next stage of their exchange rate liberalisation programme. Others argue that the latest move marks the start of an extended period of more rapid yuan appreciation. Some of them argue the authorities have decided to let the yuan strengthen as part of China's battle against inflationary pressure, as a stronger currency reduces the domestic price of imported commodities, so helping to keep a lid on consumer price rises. Others say the downgrade of the United States' credit rating three weeks ago came as a wake-up call to Beijing, and that policy makers have come to the conclusion that they should finally unshackle the yuan from a US economy and currency now clearly in terminal decline. These are intriguing ideas. However, it seems that the real reasons for the yuan's spurt may be rather simpler. And, alas, there is nothing new or exciting about them. We've seen this sort of sudden surge in the yuan before. It happens every time senior US and Chinese officials get together for one of their periodic economic summits. So it's no great surprise it should happen again just as US Vice-President Joe Biden was about to touch down in Beijing for a high-profile meeting with his Chinese counterpart and presidential heir-apparent Xi Jinping. In this part of the world Biden's visit was portrayed as an attempt to soothe Chinese fears over US credit-worthiness. But the Chinese authorities are also sensitive to US criticism that they deliberately undervalue the yuan. After all, it would be easy for American officials to respond to Chinese concerns over the credit quality of US government debt by saying: 'Well if you don't like our Treasury bonds, don't buy them.' That might sound drastic, but if Beijing were to buy fewer Treasuries, it would mean it was buying fewer US dollars. In other words, Beijing would be intervening less in the foreign exchange market to hold down the yuan - which, of course, is exactly what US politicians have been demanding for years. So it helps to have a little yuan strength for Chinese officials to point to when their US counterparts fly in as evidence that Beijing is pushing ahead with its pledges of exchange rate reform. In reality, however, the extent of reform is minimal. Although the authorities have allowed the yuan to strengthen modestly against the US dollar, they continue to intervene at a furious pace in the foreign exchange market to hold the currency down and support China's labour-intensive export industries. You can see that by looking at the second chart, which shows the yuan's performance against a trade-weighted basket of currencies. Although the yuan has strengthened by six per cent against the US dollar over the last 12 months, in trade-weighted terms, the currency has actually weakened by two per cent. In other words, a currency already reckoned to be deeply undervalued a year ago has actually become even more undervalued. There is little chance of this cheap yuan policy changing any time soon. It looks as if Chinese policy makers believe the battle against inflation has already been won - all bar the shouting - thanks to their domestic tightening. With commodity prices down by around 15 per cent over the last four months, there would be little advantage in letting the yuan strengthen now to suppress imported commodity inflation. Quite the reverse: with international trade slowing as growth in the developed economies stalls, Beijing has an even stronger incentive than before to help out exporters by intervening to hold down the value of the yuan. So once again, it looks as if the market's excitement over yuan appreciation is sadly premature.