Forex Blog: Currency Trading News & Analysis.

June 13th 2005

China considers multi-currency peg

According to high-ranking CCP officials, China is seriously considering abandoning the Yuan’s decade-long peg to the dollar. The solution, however, is not likely to please foreign governments, who have been pressuring China to revalue for quite some time. The change would effectively link the Yuan to a basket of currencies, one that includes USD, Euros, Yen, and various other currencies, in a proportion to be determined later. However, it is not clear whether the Yuan would be allowed to appreciate following the switch. China may revalue the Yuan by 3-5%, after which the value would be effectively fixed to the basket. The International Herald Tribune reports:

Pegging the yuan’s value to a basket of currencies, and not just the dollar, would make it a little more flexible and less prone to the swoops and swoons of the dollar in recent years. If the dollar fell against the euro, yen or any other currencies in the basket, then the value of the yuan would creep up in dollar terms.

Read More: China looks at linking yuan to currency pool

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Posted by Adam Kritzer | in Chinese Yuan (RMB) | No Comments »

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