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On Yuan Revaluation, Think Small

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1 On Yuan Revaluation, Think Small on Tue Apr 20, 2010 8:57 am

littlekracker


* APRIL 20, 2010, 6:57 A.M. ET

On Yuan Revaluation, Think Small



By ANDREW PEAPLE

There's a growing feeling Beijing is about to make a move on the yuan. That doesn't mean it'll be easy to spot when regime change has begun.

The last time China allowed a significant upward revaluation of the yuan, on July 21, 2005, there was plenty of fanfare. An announcement was made on the state-owned broadcaster's evening news, and a notice detailing a 2% appreciation of the currency against the greenback appeared on the People's Bank of China web site.

This is in stark contrast to China's most recent currency policy change. The yuan was effectively re-pegged to the dollar in July 2008, but it wasn't until more than a year later that officials started to acknowledge this was in fact China's policy.

Which will it be this time? There are a few good reasons to think Beijing won't want to make a big song and dance of its eventual decision.

Key among these is the political sensitivity surrounding the issue. A consensus toward revaluation may be growing in Beijing, but as recently as March Chinese premier Wen Jiabao said he didn't believe the yuan was undervalued.

Important voices in China, such as officials in the Ministry of Commerce, remain reluctant to allow yuan appreciation. At the same time outspoken champions of revaluation, willing to be seen as responsible for such a policy change, are thin on the ground.

So a signal that a move is under way could be hard to spot at first. The People's Bank of China fixes the yuan's exchange rate against the dollar each day. One sign currency regime change has started could be slightly larger than usual moves in this daily fixing, Standard Chartered's analysts note. More significant moves could come later in the year if that doesn't prove too unsettling.

Keeping a close eye on the market rather than the TV news may prove the best approach for yuan-watchers this time around.

2 Re: On Yuan Revaluation, Think Small on Tue Apr 20, 2010 9:21 am

Guest


Guest
OK I'll keep watching it and pray china finally moves!

3 Re: On Yuan Revaluation, Think Small on Tue Apr 20, 2010 9:35 am

littlekracker


ok..for anyone concerned....lmaooooooooooooooooo their rate has been fluctuating around the 6.82 range...

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