The Chinese authorities allowed the renminbi to appreciate modestly on Monday in the first day of trading since the end of the near-two-year currency peg with the US dollar was announced.The central bank left the reference rate for trading of the currency unchanged in the morning, but the renminbi strengthened and was up 0.43 per cent at one point. The currency is allowed to trade 0.5 per cent above or below the reference mid-point every day.
Had Beijing not wished the currency to appreciate by that much, it could have asked the People’s Bank of China to intervene in the market.
A few points in to order of importance.
1.) I could care less about the political reasons for not naming China a currency manipulator. The reality is clear: they are manipulating the hell out of their currency. Consider that they are growing between 8% and 10% per year. Their currency chart should be in a rally given those figures.
2.) Will they really let their currency appreciate? The answer to that is we'll have to wait and see. But let me answer it this way. When I see a chart of the yuan then I'll believe it. Until then, I'm really skeptical.
3.) I'm guessing China is allowing their currency to rise a little bit before the G20 meeting, only to apply the brakes within three months after the meeting is over.
