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.
2 comments:
David Rosenberg (Gluskin-Sheff) says that the yuan is 24% overvalued vs. 40% from a year ago, if memory serves. This is in part because their trade surplus has dropped substantially.
So, it seems to me that the Chinese are negotiating a gradual revaluation, at their own pace, on their own terms. Countries that have control of their budgets can do these things.
--Charles
Totally tracking with you on your points. I fully expect them to but the peg back in place when it benefits them. I also wondered if the wage increase in Foxconn wasn't a factor they considered in their decision.
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