Posted on 07/21/2005 4:44:43 AM PDT by TigerLikesRooster
China revalues yuan
Ends peg to the U.S. dollar that was under fire from critics; first step in currency reform.
July 21, 2005: 7:22 AM EDT
SHANGHAI (Reuters) - China scrapped the yuan's peg to the U.S. dollar Thursday and tied it to a basket of currencies, the central bank said, the first steps in highly anticipated reforms aimed at letting the currency float freely.
The new yuan rate versus the dollar revalues the currency by 2.1 percent, to 8.11 per U.S. dollar as of 7 a.m. ET, the central bank said on its Web site.
Under the previous policy, the yuan was kept near 8.28 per dollar, a virtual peg that had led the United States and other countries to complain that China's currency was unfairly undervalued
(Excerpt) Read more at money.cnn.com ...
Ping!
Not much for now, but the pennies add up!
Does this mean China will begin selling back U.S. Treasuries? And if so, is that going to create a credit crunch?
Chinese economy will start to wobble. More short-term funds will pour in to capitalize the further rise which is expected, which will in turn intensify the upward momentum. In the mean time, the economy could deteriorate. This may well signal the end of boom time in China.
Big news, which ABC just reported ... after weather and sports.
These lines are particularly encouraging:
"The People's Bank of China will make adjustment of the RMB exchange rate band when necessary according to market development as well as the economic and financial situation," the central bank said in a statement in English on its web site.
"The RMB exchange rate will be more flexible based on market conditions with reference to a basket of currencies," it added.
I think that U.S. is cultivating new buyers for T-bills China might sell. China cannot dump T-bills at will, which will destroy main consumer market for Chinese export, U.S..
Phased shift by U.S. and Japan will put China in a real bind. Japan has freer hand than U.S. when it comes to China because Japan owes little to China. Japan will take the lead in marching out of China and relocating to S.E. Asia or India. It will hurt. That is why China has been slow to match its loud anti-Japanese rhetoric with real actions.
Thta crap you buy at Wally World? It just went up a few pennies!!!
Are you that dumb? They buy into other currencies (such as Euro) and buy American land, corporations, buildings, real estate, factories and other assets. All this dolloar dumping would send the dollar down so next time you buy gasoline or home heating oil it will be 30%-50% more expensive. Same for all imports if the dollar crashes.
Cost of everything made in China will go up.
Probably they try to plug the abysmal hole in their financial system, or buy more Russian weapons.
Unless U.S. and Japan yank all investment out of China overnight, I doubt that China can so easily sell T-bills however eager they would be.
With India and Vietnam now arrayed against China, while Japan getting more belligerent, China has a lot of things to worry about.
Which is precisely why China was so reluctant to do revaluation. Maintaining export volume is important for Chinese regime now. The myth of economic growth should be sustained or they are in deep political trouble.
The yuan currency has been strengthened, effective immediately, to a rate of 8.11 to the U.S. dollar — compared to the 8.28 it has been set at for more than a decade. The new trading regime will begin Friday, the government said in an announcement on state television.
---- So they did an immediate bump and supposedly will tie to a basket....
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.