Monday, June 21, 2010

Chinese Yuan Jumps to 21 Month HIgh (Video)

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Chinese Currency: yuan aka renminbi

China Ends 2 Year Peg to Keep Yuan at Lower Levels

The Chinese announcement to end their currency peg has affected markets worldwide, being bullish for equities and commodities. The USA, President Obama and Congress, have been calling for a revaluation or floating yuan versus the US Dollar, as have other countries and their currencies. The fixed-rate yuan gave China a trade advantage.

Now the probability is that Chinese goods will be more expensive in the USA and the Chinese will have more purchasing power in their home country. So, there may well have been some pressure in mainland China to "give everyone a raise". The media has kept reporting of labor unrest in China and this would be more pressure on the Chinese leadership than President Obama, Treasury Secretary Geithner, and ramped up verbiage in Congress. China can and will stop or slow down the the yuan exchange rate at any point the leadership determines it is to their ultimate advantage to do so, of course.

The G20 nations meet this weekend and this may have been a minor factor. I think the primary factor was labor unrest at home, in China. The G20 meeting is a bigger deal normally to the media than it is on actual implementation of significant policies, a great photo op for the world leaders, and the rhetoric is astronomically high for the world and home audiences.

CNBC Squawk Box video with Boris Schlossberg, GFT Forex researcher, discussing this overnight change in Chinese currency policy below:

Watch CNBC Video HERE.

The positive aspect is China appears optimistic about the global economic recovery to implement this policy.


Google Finance, US Dollar/Chinese Yuan, USDCNY

Chinese Yuan Under Scrutiny Before G20 Meeting (Reuters)

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