Yuan Revaluation: When, How, How much

The won rose five times as fast as China’s currency in the 12 months after officials in Beijing last relaxed the foreign- exchange regime in July 2005, data compiled by Bloomberg show. Singapore’s dollar climbed three times as much, the rupiah five times and Malaysia’s ringgit twice as fast.

Chinese government has kept the yuan at 6.83 per dollar for the past 21 months to shield exporters from the global recession and a slump in world trade. The country allowed the yuan to appreciate 21 percent in the three years before that.

It gained 1.4 percent versus the dollar in the year following the July 2005 revaluation. By comparison, Singapore’s dollar surged 4.3 percent, the rupiah 7 percent, the won 7.4 percent and Malaysia’s ringgit 3.3 percent, Bloomberg data show.

Possibility that the trading band may be widened to between 0.75 percent and 3 percent either side of the central bank’s daily reference rate.

The yuan was revalued by 2.1 percent on July 21, 2005, after China ended the decade-long peg to the dollar and introduced a “managed float” against a basket of currencies.

Foreign-exchange reserves rose to $2.45 trillion in March, the world’s largest holdings, as the central bank sold its own currency to maintain an almost two-year-old peg. China may also want to get rid of this ever increasing dollar hoard in terms of foreign exchange reserves due to its almost two year old-peg.

Yuan’s appreciation will reduce its soaring import bill.

The largest and first trade deficit in last six years which was whopping USD 7.24 billion. The last trade deficit came in April 2004 which was 2.26 billion. According to Officials trade with Taiwal, Korea and Japan prompted this deficit while for EU and USA the balance of payments remain surplus. It is expected that if in very near future China is going to appreciate that it would not do gradually in phase but at one-off manner.  

The Chinese Premier clearly stated that they would nor act on any external pressure for its forex policy.

All IN ALL THE EYES SEEMS TO BE ARE NOW MORE ON CHINESE FOREX MOVE RATHER THAN GREECE DEVELOPMENT.