Since its revaluation, the Chinese Yuan has not fluctuated, leading some traders to joke ‘Yuan’ should be spelled ‘Yawn.’ China’s Central Bank has reinforced this stasis by informing the public it has no intentions to re-adjust the peg in the near-term. Nonetheless, many forex traders are still optimistic that further revaluation(s) will be carried out within the next 12 months, with a consensus expectation of 4%-6%. Non-deliverable forward contracts indicate an expected 4% appreciation, down from 6.5% last week. In order to discourage traders and speculators from maintaining long positions on the Yuan in anticipation of further revaluation, the Bank of China recently lowered short-term interest rates, meaning it is now more expensive-in real terms-to hold Yuan rather than USD. The Wall Street Journal reports:

Others who expect the yuan to appreciate this year cite China’s large, growing trade surplus with the U.S. and what they say could be renewed political pressure from the U.S. sooner than most expected.

Read More: After the Yuan Step, Traders Now Await Beijing’s Next Move

It seems a new school of thought has emerged among forex traders: Central Banks’ demand for foreign exchange. While traders employing fundamental analysis have long taken this into account, it has achieved a new level of recognition following the revaluation of the Chinese Yuan. The central tenet of this school holds the value of a nation’s currency is directly correlated with foreign demand for that currency. Since Central Banks are often the largest holders of foreign exchange, they play an important role in this type of analysis.

In the wake of the Yuan revaluation and declining demand for USD, forex traders have attempted to identify the currencies that Central Banks will increase their future holdings in. As the Euro continues its precipitous decline, many traders have shifted their attention to the Canadian Dollar, which has appreciated 30% over the last few years. Moreover, the Canadian economy appears strong, and will be helped by rising commodity prices. As a result, many traders are making huge bets on the Canadian Dollar. Reuters reports:

“I don’t see central banks reversing this policy. They’ve become more sophisticated rather than less. The age of central banks only having one or two currencies is over,” said Jeremy Friesen, senior currency strategist at RBC Capital Markets.

Read More: Canada dollar gains favor as greenback alternative

As forex news has gained more coverage in the media, and currencies have become ever more volatile in the wake of recent political and economic developments, forex trading has surged in popularity. Now, it seems wealthy investors have caught forex fever. Several prominent investment banks and money managers have begun marketing currency investments to their wealthy accountholders. Citigroup, for example, recently introduced a note tied to a basket of Asian currencies, including the Korean Won and the Indian Rupee. The product is principal-protected, meaning there is no downside. The only catch is a $50,000 minimum investment. Slightly more affordable is Everbank’s “Asian Advantage” CD, which is tied to four ‘Pacific Rim’ currencies, including the New Zealand Dollar and Singapore Dollar. The CD requires only a $20,000 investment. The Wall Street Journal reports:

Many of the “baskets” that the private banks have created involve derivatives and options, which are designed to harness a current trend and give investors exposure to certain sectors without having to buy the actual investment.

Read More: Banks Beckon Wealthy to Invest in Currency Plays

In the short-term, reckon analysts, the Japanese Yen will hinge on the actions of Japan’s Prime Minister, Junichiro Koizumi. The reason is Koizumi is currently pushing for the modernization of Japan Post, which not only manages Japan’s postal system but also represents the world’s largest savings bank. Koizumi is so adamant that the bill passed, that he has threatened political upheaval should it fail. Some analysts feel Japan Post will likely be privatized, despite the uproar surrounding it, while others put the odds closer to 50:50. While analysts disagree over the bill’s likelihood of success, all agree that the situation will continue to dictate the movement of the Yen. The Financial Times reports:

“It remains close, and markets dislike uncertainty, so with the data calendar light for now, the yen may face further downward pressure,” said a senior forex strategist. However a number of analysts pointed to the scope for the yen to rally if the bill is passed.

Read More: Yen slides on renewed Koizumi doubts

The New Zealand Dollar-or Kiwi- has recently underperformed almost every industrialized currency, and has been dubbed “the dog of the currency world.” However, several developments have induced optimistic forecasts from economists and experts, who predict a period of NZD appreciation. First, the revaluation of the Yuan has generated broad levels of support for ‘Pacific’ currencies. Next, real economic growth and inflation in New Zealand continue to climb, which may force the Bank of New Zealand to forestall its planned rate cuts. At 6.75%, New Zealand interest rates are currently the highest among developed nations. As a result, several prominent New Zealand analysts have predicted double-digit appreciation of the NZD by year-end. The Dominion Post reports:

The Bank of New Zealand is picking the US-NZ dollar cross rate to fall from the current 67.5 level to 67 by September, and to 66 by December. Brokers First NZ Capital expect it to drop even faster – to 66 by September, to 64 by December and to 61 by the end of next year.

Read More: Currency volatility dogs rate forecasts

A surging interest in currency trading has been accompanied by a host of new brokerages and institutions offering forex trading accounts, information, and advice. Unfortunately, many of these institutions appear to be little more than fly-by-night operations, defrauding investors and reaping huge profits through Ponzi schemes and other scams. Since 2000, 23,000 investors have collectively lost about $350 million to fraudulent brokerages. Hundreds of new fraud cases are now reported every week, due to a near absence of regulation. While the Commodity Futures Trading Commission is technically charged with regulating forex derivatives markets, it has been unable to leverage its authority into regulating spot transactions, and scammers are thriving. The Wall Street Journal reports:

The slim supervision is attractive to scammers, many of whom claim they can help customers cash in on the dollar’s fluctuations. By avoiding dealings on the Chicago Mercantile Exchange and other established futures and options arenas, fraudsters can evade the CFTC’s reach.

Read More: Scammers Operating on Periphery Of CFTC’s Domain Lure Little Guy With Fantastic Promises of Profits

Brazil’s Central Bank voted for the second consecutive month to hold interest rates constant at 19.75%, which remain among the highest in the world. The Central Bank continues to target inflation in conducting its monetary policy. Specifically, it is aiming for 2005 and 2006 inflation targets of 5.1% and 4.5%, respectively. However, Brazil’s ultra-tight monetary policy may be counter-productive, as certain foreign investors continue to pour ‘hot money’ into Brazil’s economy in order to take advantage of the unnaturally high interest rates. If economists are correct in their estimates, the Central Bank will fail to meet its respective inflation targets for the next couple of years, which means current interest rate levels will likely endure in the foreseeable future.

Read More: Brazil cenbank holds key rate steady at 19.75 pct

As the 2.1% Yuan revaluation sets in, economists and traders alike are stepping back and asking one question: what’s next? The revaluation was surely momentous, but ultimately insignificant. Experts still reckon the Yuan is still undervalued by 20% – 40%. Non-deliverable forward contracts reflect collective expectations for future exchange rates. The 1 year Yuan forward contract is currently trading at 7.54 RMB/USD, indicating investors believe the Yuan will be allowed to appreciate further before year end. As a result, while China undoubtedly hoped the revaluation move would stem the flow of ‘hot money’ into China, it is likely to have no effect, as risk-averse investors will continue to pour money into Chinese assets and equities, confident they can earn stable returns. The Financial Times reports:

A [Chinese policy maker] said he did not think China would allow dramatic changes in the exchange rate. “The principle is stability as well as flexibility,” Prof Yu said. “We don’t want to encourage speculative capital inflows.”

Read More: Renminbi’s tight rein a damper on US hopes

In his recent testimony before select members of Congress, Alan Greenspan reiterated his optimism in the US economy.  While he remained upbeat in his forecasts, however, he was careful to identify several potential weaknesses, including rising energy and unit labor costs, and the apparent formation of regional real estate bubbles. Greenspan also hinted that the Fed would continue to raise rates at a gradual, or ‘measured’ pace towards that proverbial neutral level.

Many traders reacted negatively to Greenspan’s testimony, expecting him to paint a rosier picture of the economy. Nonetheless, at least two additional interest rate increases have been priced into most securities. Insofar as there are no surprises, it should be smooth sailing for the USD. Reuters UK reports:

Analysts said Greenspan’s assessment of the world’s largest economy should prop up the dollar in the longer term, but for now some investors were taking profits on their greenback holdings.

Read More: Dollar falls after Greenspan

After years of speculation and hearsay, China has finally revalued the Yuan.  However, the currency will remain effectively pegged to the USD at a rate of 8.11 RMB / USD, up from 8.27 RMB / USD, and will be prevented from fluctuating against the USD by more than .3% in either direction.  China also announced that in the near-term, it may rotate the peg to a basket of currencies, which would presumably allow the Yuan to appreciate more.  As expected, shortly after China revalued, several other Asian countries followed suit.  Malaysia was first, announcing a rise in the value of its national currency, the Ringgit. (Your correspondent reported on the possibility of a Malaysia-China dual currency revaluation on July 8th). While the Yuan revaluation was ultimately slight, it could have important implications for other currencies.  The Financial Times reports:

A senior currencies strategist said “This is China trying to walk a very fine line between protecting their economy and responding to political pressures, notably from the US.” “Because the revaluation is less dramatic and because it is gradual, the market reaction is not as great.

Read More: China revalues renminbi

The release of the minutes of last month’s meeting of Britain’s Central Bank revealed a growing minority of members in favor of lowering interest rates.  The official vote was 5-4 in favor of maintaining interest rates at current levels. However, few economists and pundits had reason to believe the vote would be so close. While many traders had already begun to price lower interest rates into bonds prior to last month’s meeting, it seems a rate cut at the next meeting is a near certainty. Recent economic data not only suggests the economy is slowing down, but also that inflation is likely to be lower than expected. As a result, both the members of the Central Bank targeting inflation indices as well as those targeting general economic performance, would seem to have a solid basis for lowering rates. The Financial Times reports:

Sterling had already been on the ropes prior to the MPC announcement…Against this backdrop sterling fell to a 19-month low in trade-weighted terms.

Read More: Sterling falls as BoE votes 5-4 against rate cut

The Japanese Yen is looking especially perilous, due to increasing political uncertainty.  Junichiro Koizumi, Japan’s Prime Minister, has undertaken an effort to privatize Japan-Post, which among other things, is the world’s largest savings bank. Unfortunately for Koizumi, there are several prominent Japanese politicians who are opposed to the move, on the grounds it may result in job losses.  Koizumi’s administration has witnessed growth, albeit miniscule, in Japan’s economy, following a decade-long recession. As a result, investors and traders are not reacting positively to the potential rejection of Koizumi’s proposal. A senior Japanese politician and Koizumi supporter suggested such a rejection would have a significant impact on asset and currency markets. Bloomberg news reports:

“Koizumi has been a source of stability after a decade of economic turmoil in Japan,” said a [senior economist].  “Investors like stability. The prospect of removing that stability would not be good for the yen.”

Read More: Yen Touches 14-Month Low Against Dollar, Tumbles Versus Euro

A recent string of ugly episodes have pitted the two great economies of America and China against each other. Recently, CNOOC, a Chinese oil company, announced its intentions to acquire Unocal, an American oil Company. After several prominent American politicians publicly stated their opposition to the deal, a high-ranking Chinese General suggested continued American interference in Chinese economic and political issues might warrant the use of nuclear weapons. In addressing the increasingly fragile state of Sino-US relations, President Bush highlighted several sources of economic conflict between the two nations. Topping his list was China’s currency peg, which he labeled a ‘difficulty.’ Bush admitted the peg has become a source of tension between the two countries, and he will continue to convince them that it is in their best interest to revalue. The Washington Post reports:

"We have some difficulties on the trade front with China, and one such difficulty is their currency," Bush said at a joint news conference with Australian Prime Minister John Howard. "And we’ve worked with China to convince them that it makes sense for them to change how they value their currency," Bush added.

Read More: Bush says China’s currency peg a difficulty

This month, China’s already massive foreign exchange holdings swelled to a new all-time high of $711 Billion, having increased $100 Billion in the last 6 months alone. At this pace, it will not be long before the $1 trillion level is breached. As ‘hot money’ continues to flow into China, the government is forced to print Yuan, that will ultimately be exchanged for dollars. In order to prevent an outbreak of inflation and subsequent upward pressure on the Yuan, China’s Central Bank must issue bonds and remove the new Yuan from circulation. In doing so, the country has built up gigantic holdings of dollars, held mostly in US treasury securities. It seems China will continue to sterilize capital inflows in order to prevent speculators from profiting from the revaluation of the Yuan, which many pundits believe is imminent. It is also worth noting, that as China purchases ever more US treasury securities, the US becomes ever more beholden to the Chinese government to maintain their holdings. The CCP government could do serious harm to the US economy, and to the value of the USD, if it were to ever to sell a significant chunk of the reserves. The China Daily reports:

The build-up in reserves increases the pressure on the People’s Bank of China, the central bank, and its efforts to control monetary supply and inflation, and will fuel an already intense debate about whether Beijing should revalue its currency, the renminbi, now pegged to the US dollar.

Read More: China’s forex reserves increase to US$711bn

After the French and Dutch rejection of the EU Constitution, many policy-makers have started to question the sensibility of a European economic union and the concomitant Euro currency. Lately many leaders have come forth and publicly criticized the Euro, blaming the currency for their respective economic woes. A new survey by two prominent HSBC economists asserts that a breakup of the Euro will become increasingly likely, if certain structural reforms are not implemented. The report goes on to argue that the nations that comprise the EU are too fundamentally different to warrant a common currency. The one-size-fits-all monetary policy has proved especially damaging, as interest rates cannot be adjusted in response to civerging regional economic conditions. The result is growing economic disparity. The economies of Germany and the Netherlands are languishing; meanwhile, bubbles are forming in regional property and asset markets, spurred by unnaturally low interest rates. Unless a miraculous economic turnaround is staged, it seems EU leaders may succumb to popular pressure and dissolve the Euro. The Guardian Unlimited reports:

It is worth remembering that there were huge legal and practical problems over creating the euro in the first place. But those were overcome. It would therefore be foolish to exclude the possibility that the euro may at some point lose members or even break up altogether.

Read More: Stop the euro – we may want to get off

The Canadian Dollar has hit a minor hurdle in its multi-year rise against the USD. As the corruption scandal subsided, the attention of forex traders turned naturally to economic performance and interest rates, and the news on both fronts ranges from weak to neutral. First, new manufacturing and trade data seem to indicate the Canadian economy is slowing. Economists attributed the decline in exports to the Canadian Dollar’s recent strength, which has rendered many Canadian products uncompetitive on global markets. With regard to interest rates, investors have been expecting a rate hike for quite some time. Commodities are appreciating rapidly, and inflation is rearing its ugly head in resource-rich Canada. However, the Central Bank has not yet responded by raising interest rates. In this rarest of cases, no news is bad news. DailyFX reports:

The currency’s rally was likewise cut short by no change in news from the Bank of Canada. It seems that the markets have priced in expectations of a rate hike and reacted negatively to the absence of change.

Read More: Loonie Loses Ground On BoC Comments And Soft Export Data

The Dollar received a much-needed boost today in the wake of two revelations. First, the release of trade data indicated the US trade deficit actually declined in June, to $55 Billion. While this is still sizable, it is certainly a cause for celebration. As paranoia over outsourcing and the Chinese economic boom continue to reverberate through the media, many pundits have predicted the trade and current account deficits will widen significantly. Accordingly, a decline in the trade deficit was viewed by forex traders as nothing short of miraculous.

In addition, the White House announced plans to significantly reduce the budget deficit. The proposal calls for a steady reduction over the next 5 years, to reach 1% of GDP by 2010. It seems the stars have finally aligned for the USD. If US interest rates continue their climb and the American economy retains its robustness, the USD should continue to rise.

"All the fundamentals are in place for the dollar rally to continue."  While the last few days have seen unwinds of dollar longs/euro shorts, the move has largely been viewed as corrective and necessary before a new wave of dollar buying could be seen.

Read More: Narrower US Trade Deficit Lifts Dollar

It’s official. The United Arab Emirates and Qatar can be added to the list of countries that are planning to diversify their foreign exchange reserves. Both countries have announced their intentions to shift 5% of their reserves into Euros. While other Arab nations have been coy about the prospect of diversification, it appears the entire region will soon follow suit. The wave of announcements is eerily redolent of earlier this year, when certain Asian countries announced similar plans. While Middle Eastern countries maintain lower forex reserves than most East Asian countries, any talk of diversification is still to be taken seriously. As the Euro has declined against the USD, many nations have smelled a cheap and easy opportunity to diversify. The Khaleej Times Online reports:

In the three years to 2004, the euro gained nearly 60 per cent against the dollar, due partly to expectations central banks in the Middle East and Asia are diversifying away from the falling dollar into the euro.

Read More: UAE mulls dollar reserves cut

At its last meeting, Britain’s Central Bank voted to leave the national interest rate unchanged at  4.75%. With new data pouring in every day suggesting Britain’s economy is in trouble, the Bank’s leaders may soon rethink their stance on interest rates. Consumer spending, considered by many British economists to be the most important growth driver, is declining. The drop in savings rates and stagnation of home prices indicates consumers have already spent all that can be expected. Moreover, last week’s terrorist attacks will likely cause consumer confidence to fall further, mitigating the possibility of a fast recovery. Economic growth is now projected at 2.1% for 2005, down from 2.75% in 2004. When the Central Bank meets next month, the upshot will most certainly be lower interest rates. Traders and investors concur, and have priced two rate cuts into British debt futures, implying a rate of 4.25% at the year’s end. Rate cuts or not, the British Pound will most likely continue to slide. The Economist reports:

The strong chance of feeble growth in the second quarter—the National Institute of Economic and Social Research is forecasting a rise in GDP of only 0.3%—means that a cut in August is on the cards. In a poll of economists on July 5th by Reuters, 26 out of 43 said that rates would fall next month.

Read More: They’re coming down soon

The USD has been on a tear the last few months, and investors have been wondering when it would end. Fundamental indicators will catch up eventually, right?  The answer, is maybe. The USD has begun to fall, but not for the reasons you might think. The US is still running a considerable trade deficit, and the current economic boom looks more fragile than ever. It is not these factors which are causing the USD to depreciate, however. Rather, it is a "short squeeze."  While a short squeeze can refer to a number of different trading patterns, this particular use of the term refers to the sudden accumulation of short positions in the USD. It seems investors have been anticipating a reversal in the USD for quite some time. At the first signs of weakness, many traders rushed for the exits. It is estimated speculators are currently short a total of $10 Billion USD, which could be enough to drive the USD back to the depths from which it came.  The Financial Times reports:

[A trader] added: “We saw the squaring up of euro-shorts in the low $1.20s, then short-term CTA [commodity trading adviser] accounts got on it at $1.2040. It is largely technical and position driven.” Such a move was always likely as speculators have turned from being short the dollar to building long positions in recent months.

Read More: "Short Squeeze" hits dollar

While many southeast Asian economies explicitly peg their currencies to the USD, it is China that suffers the most scrutiny.  This is natural, as China is by far the largest economy in this region, excluding the Asian ‘Tigers’ and Japan.  A new rumor is circulating that that China and Malaysia, another serial currency pegger, may team up and revalue their currencies at the same time. The Malaysian Ringit was initially pegged to the USD following the Southeast Asian economic crisis, and has been held in place since.  Malaysian officials have hinted that the country may revalue in response to fundamental indicators, which suggest the currency is grossly undervalued.  However, the Malaysian prime Minister insisted while his country and China remain close political allies, no dual currency revaluation agreements are being considered. AFX News Limited reports:

Amid intense speculation about a looming adjustment of the ringgit, Abdullah has said in recent weeks that Malaysia will not adjust its currency peg for the time being but is closely watching developments in the financial markets.

Read More: Malaysia, China not collaborating on currency peg adjustment

Recent economic data suggest that America’s record government spending and current account deficits are driving the country deeper into debt.  A new report on America’s indebtedness attempts to discredit this popular belief.  According to the report, America’s foreign assets actually appreciated in Dollar terms, as the USD depreciated, offsetting much of the increase in foreign borrowing which was taking place.  In short, while it appears America is sinking deeper into debt, the truth is less dramatic. Whereas, America ran an $600 Billion current account deficit in 2004, its net foreign liabilities increased by only $200 Billion. Due to the appreciation of its foreign assets. However, what goes up must come down.  As the USD has appreciated over the last few months, so have its foreign holdings depreciated.  It may take a drastic reversal of the USD to correct this problem.  The Economist reports:

Of course, a further drop in the dollar and a fall in American share prices could trim those liabilities again in 2006. But that is hardly a reason to buy dollars.

Read More: Show me the money

Forex traders and investors responded to the terrorist attacks which rocked London today by sending the British Pound to near 18-month lows against the USD.  As soon as the news reached the trading floors of forex dealers, panic set in, and the Pound quickly lost 1% of its value, relative to the USD. Experts agree both the attack-and the ensuing panic in the markets-could have been far worse.  One trader spoke of a “risk premium” which has been built into the currencies of nations that are potentially susceptible to terrorism, and probably prevented the Pound from depreciating further. Investors begin to understand the relatively minor implications of this latest attack, the Pound may well recover.  Forbes reports:

“The knee-jerk reaction was quite violent across all markets and the usual safe-haven trades were being put on,” said one currency strategist.  “The market is now backing off a little and questioning the magnitude of the implications.”

Read More: Sterling hits 18-month low against dollar

In the last 6-8 weeks, the USD has risen 10% against the Euro and 5% against the Yen.  The appreciation of the USD was spurred by global economic and monetary uncertainty as well as interest rate differentials that increasingly favored the US. While fundamental indicators continue to support the USD, technical indicators do not. Yen/USD currency options suggest the USD has appreciated too much too fast, and may be due for a correction. This contract is among the most heavily traded forex options and represents investors’ expectations of the future direction of the Yen/USD exchange rate. Recently, the contract began to move in favor of the Yen, suggesting the Yen was due to appreciate.  In the past, this kind of dramatic movement in the forward exchange rate has typically been followed by a change in the spot rate, which could potentially spell trouble for the USD. The Wall Street Journal Asia reports:

One options dealer said, "In the options market, people say that when risk reversals favor dollar strength against the yen, [the dollar’s] rise in the spot market is over."

Read More: Currency Options Suggest Dollar Could Fall Soon

US Representative John Dingell has introduced a bill that addresses currency manipulation. Specifically, the bill would require any nations that enter into future trade agreements with the US to permit their currencies to float. Currently, a number of countries, mainly in Southeast Asia, either explicitly peg their currencies to the USD or intervene in forex markets to prevent their domestic currencies from significantly fluctuating. Dingell has argued currency manipulation is tantamount to a trade subsidy or tax break, as a nation’s goods and services are made artificially cheap by an undervalued exchange rate.  He cited China and Japan as serial currency manipulators who have hamstrung many American firms. The Detroit Free Press reports:

Dingell’s bill would apply to all countries that trade with the United States by requiring the free trading of currencies as an objective for every new trade agreement. The bill also would require the administration to report on currency manipulations to Congress and seek compensation for harmed industries.

Read More: Dingell opposes currency manipulation

For the last few years, speculators in search of high interest rates have poured ‘hot money’ into Britain, causing the Pound to appreciate.  Now, it seems the Pound may be overvalued, rendering British exports uncompetitive.  A new spate of economic data indicates the British economy is slowing rapidly. In addition, a British housing bubble has begun to deflate, causing a subsequent decline in consumption. As Britain’s Central Bank prepares to lower interest rates, it seems investment will follow the same downward path as consumption. It may take a massive correction of Britain’s exchange rate to stem the decline of its economy. The Times Online reports:

With sterling’s valuation the focus of renewed attention, pressure on the pound will almost certainly intensify as currency markets home in on the increasingly apparent vulnerabilities of Britain’s economy.

Read More: Faltering growth knocks pound’s potency

Last week, the Federal Reserve raised US interest rates for the ninth consecutive time, to 3.25%.  Most economists and investors reckon Greenspan will continue coaxing interest rates upward towards that mythical neutral level, which will contain inflation without inhibiting economic growth.  Not all economists are as optimistic about the prospects of America’s economy, however. It seems much of the current economic growth is being driven by investment and consumption, which are financed through a disproportionately low cost of capital, and home equity loans secured through rising house prices, respectively. As interest rates continue to rise, it is inevitable these two factors of GDP will fall, spelling trouble for the US economy. The Wall Street Journal reports:

[Economists] were big bulls at the start of the year, expecting GDP to advance about 5.4% during the first half of this year…But now they expect growth of about 3% for the remainder of this year. Their index of leading economic indicators has been falling, and they worry that consumer confidence is fragile.

Read More: Economists See Modest Growth and Many Worries

Secretary of the Treasury John Snow has renewed his guarantee that China will revalue its currency, going so far as to say it would happen within the next few months. Snow issued the statement to a small group of American politicians, who were drafting a bill that would effectively impose a 27.5% across-the-board tariff on all Chinese imports, provided the Chinese government failed to revalue the Yuan within a reasonable time frame. The Senators who were sponsoring the bill agreed to postpone a vote on it, which was originally scheduled to occur within the next few weeks, in light of Snow’s commentary. In an unofficial vote, 67 senators approved the bill, indicating it was likely to pass in its official vote. The Senators agreed that it would be better for Sino-US relations if China ‘naturally’ decided to revalue the Yuan, rather than as a result of foreign pressure.

"They have convinced us that the likelihood of real progress in China on currency revaluation is very real and could well occur in a very short while, in the next few months," Schumer said. "If we can get there by accommodation, so much the better."

Read More: Senators Told China Will Loosen Policy On Currency