China Takes First Step Towards Un-pegging Yuan to Dollar
It's a baby step, but a step in the right direction...
China said Thursday it will no longer peg its currency to the U.S. dollar, adopting a more flexible system based on a basket of foreign currencies that could push up the price of Chinese exports to the United States and Europe.
China had been under pressure for years from its trading partners to let the value of the yuan float or at least trade at a stronger rate and some U.S. lawmakers had threatened to impose retaliatory tariffs if China didn't adjust its currency scheme. The United States and others had said the communist nation undervalued the yuan by up to 40%, giving Chinese exporters an unfair price advantage.
This is the start of a gradual appreciation process," said Frank Gong, managing director of JPMorgan Chase & Co. in Hong Kong. "It will help balance Chinese trade flows. Export volumes will come down. Import volumes will pick up. It will help reduce trade tensions."
China said Thursday it will no longer peg its currency to the U.S. dollar, adopting a more flexible system based on a basket of foreign currencies that could push up the price of Chinese exports to the United States and Europe.
China had been under pressure for years from its trading partners to let the value of the yuan float or at least trade at a stronger rate and some U.S. lawmakers had threatened to impose retaliatory tariffs if China didn't adjust its currency scheme. The United States and others had said the communist nation undervalued the yuan by up to 40%, giving Chinese exporters an unfair price advantage.
This is the start of a gradual appreciation process," said Frank Gong, managing director of JPMorgan Chase & Co. in Hong Kong. "It will help balance Chinese trade flows. Export volumes will come down. Import volumes will pick up. It will help reduce trade tensions."
posted by Nordeaster | 1:47 PM
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