Posted on 06/19/2010 3:21:44 PM PDT by bruinbirdman
China said yesterday that it would allow a more flexible yuan, bringing to an end its controversial 23-month peg to the US dollar which has been accused of keeping Chinese exports artificially cheap.
The People's Bank of China (PBOC) ruled out the one-off revaluation that US politicians had sought, arguing that there was "no basis for big fluctuations or changes".
Instead, the yuan's 0.5pc daily trading band will remain unaltered, but the central bank will use a system of setting daily reference rates for the currency to slowly guide the exchange rate against the dollar higher. This is a similar policy to that followed for three years until the start of the credit crunch in mid-2008. The yuan appreciated by 21pc against the dollar during that time.
"The global economy is gradually recovering," the PBOC said. "The recovery and upturn of the Chinese economy has become more solid with enhanced economic stability."
The announcement was issued on the PBOC's website in both Chinese and English simultaneously, a departure from usual practice.
China was expected to come under heavy pressure to change its exchange rate policy at a G20 leaders' meeting this week in Toronto, but this move is likely to deflect much of this criticism.
Some US lawmakers have insisted that President Barack Obama use trade sanctions against China if the policy was not changed. They argued that the peg was being maintained to make Chinese exports more competitive.
Senator Charles Schumer has been pushing for a bill that would require the Treasury Department to determine if a nation has a currency "misaligned" with the US dollar. It would then allow companies to seek import duties against goods from the misaligned country in addition to seeking compensation.
Adding to US politicians' anger, data released on Thursday
(Excerpt) Read more at telegraph.co.uk ...
The best toy the Chinese ever made is the Timmy G. doll. They just pull the string and he says whatever they want him to.
Get an HSBC account in Hong Kong. You can convert your deposits from USD to CNY, so when this re-valuation happens you can ride on the action.
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