The Chinese central bank announced it would abandon its two-year peg to the US dollar a week ahead of Saturday’s G20 summit in Canada where the value of the renminbi had threatened to become one of the major issues.I used the word glacial to describe what would happen when China made this announcement.
Since then, the Chinese currency has risen by 0.5 per cent against the US dollar, a large movement in the context of the usually tightly controlled currency regime, but still only equivalent to the daily 0.5 per cent trading limit that has been in place for five years.As a result, the Chinese delegation could yet come under pressure at the G20 summit to be more specific about what will change with the new currency policy.
“The rest of the [G20] were not born yesterday, and there may be some suspicion that the move over the last week was just window-dressing to take the exchange rate issue off the top of the agenda,” said Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong. “To reduce the risk of trade tensions, we will need to see further renminbi gains in the days and weeks ahead.”
I hold by that characterization.
