Monday, June 21, 2010

Chinese Currency "Soars"

Kidding about the "soars", but the removal of the peg to the dollar was still the big news to come out over the weekend. Bloomberg details:

The yuan rose the most since a July 2005 revaluation and forwards jumped after China’s central bank ended a two-year peg before a Group of 20 summit this week.

The currency advanced 0.42 percent to 6.7976 per dollar as of 5:30 p.m. in Hong Kong, the biggest gain since July 2005, according to data compiled by Bloomberg. The 12-month non- deliverable yuan forward rose 1.1 percent to 6.6425, implying traders are betting on a 2.3 percent appreciation.

A stronger yuan will help curb inflation in the world’s third-largest economy and shift investment toward service industries from export-manufacturing, the People’s Bank of China said yesterday. The move may also deflect criticism from President Barack Obama and other G-20 leaders, who say China relies on an undervalued currency to promote overseas sales.

“It will be a very gradual appreciation but it could be front-loaded,” said Nizam Idris, a Singapore-based currency strategist at UBS AG, the world’s second-largest foreign- exchange trader. “The yuan will appreciate about 4 percent this year and 5 percent next year.”
Below we see the move... minimal (i.e. the "largest in 20 months" was only 0.4%) to say the least, but in the right direction (if in fact it is anything more than political maneuvering).



Source: Exchange-Rates