China revalues Yuan!

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