China to Wake Sleeping Yuan – Markets Rejoice

Amidst all this economic doom and environmental gloom the Chinese have finally at long last stepped forward and stirred the stagnant waters of finance with a big stick. The Yuan! This Chinese currency that literally stands for round object or coin will finally start to roll in the direction the whole world has been trying to push it in for years.

On Saturday China stated that it is contemplating letting its currency appreciate in value. This one small statement started an avalanche of repercussions that were felt throughout the world’s financial markets. The Euro which is still under enormous pressure from a delicately balanced internal financial system that some analysts say, threatens to pull it down to dangerous levels for the EEC as a whole, actually rose to a 4 week high against the U.S. Dollar.

The Australian dollar rose more than 1 percent as the news broke giving positive signs to investors. Is this the signal the financial world has been waiting for? Is it now okay to start investing once again in riskier stocks and getting the market moving as a whole in a steady upwards direction?

Could this be a ploy by the Chinese who want more out of the G-20 meeting this month in Toronto and want to smooth the way a little? The yuan has been a point of contention for over 23 months now, with Washington continuing to pressure China to move towards a more market based exchange rate. This move is seen by many as the first step in averting a trade war within some of the world’s biggest economies.

Beijing has since re-iterated that this would not be a one off major move, but smaller moves gaining in strength until Beijing was satisfied that the currency was at fair level. It is too early to guess what a fair level means to the Chinese, but if the past is anything to go by then there might still be some fairly heated discussions around the financial tables of the world to come yet.

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Posted by on Jun 20 2010. Filed under Featured News, Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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