For nearly two years, the Chinese yuan has been pegged to the U.S. dollar. Critics, including many in the U.S. government, have said it gives an unfair trade advantage to Chinese exporters. They say this peg has given an artificially low value to the yuan.

Now, after two years of political pressure, the peg seems to be loosening. Over the weekend, the Chinese regime announced it would relax its control over the yuan.

Global manufacturers welcomed the announcement, and it spurred gains across many stock markets on Monday. And in the currency exchanges that day, the yuan gained by more than 0.4 percent.

But the optimism was short lived. On Tuesday, the yuan fell back by 0.2 percent.

Traders said Chinese state-owned banks stepped in to the market and aggressively bought U.S. dollars to make the yuan fall. Many see this as a sign that the regime will continue to control the yuan, and its appreciation will be much slower than anticipated.

China's Foreign Ministry reaffirmed this suspicion on Tuesday, saying that any change in the yuan would come only gradually.

This is likely because any rapid gain in the yuan would pose a threat to Chinese manufactures.

[Ha Jinming, Chief Economist, China International Capital Corp.]:
"Exchange rate adjustment may affect some sectors' growth or profits. I think those sectors that have a low pricing power and also pretty low profit margin may not be terribly happy about this move."

Small gains in the yuan are unlikely to have a major impact on global trade. Some believe the announcement of the relaxed policy is simply a political move. It comes just a week before world leaders will meet in Canada for the G20 summit.