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By exploiting pump-induced birefringence in addition to cross-gain modulation, we have obtained improved extinction ratio and reduced optical power penalties for a wavelength converter using a semiconductor optical amplifier. In the probe beam wavelength range of 1528-1566 nm, while extinction ratios and power penalties of a conventional wavelength converter are found to be 4.5-9.2 dB and -0.5-2.1 dB, those of the proposed converter are 6.6-10 dB and -0.7-1.0 dB, respectively. The proposed converter shows better performance for all wavelengths in the range examined for both extinction ratio and power penalty. Especially, more improvements have been obtained in the longer wavelength.