Article: China?s Inscrutable Currency Strategy
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China?s Inscrutable Currency Strategy
Purpose: Expose China Opportunities for Smart Investors
The move by China?s central bank to drop the yuan?s rigid peg to the dollar last week on the day of my return after a three-week trip to Asia left a host of questions unanswered. The basket of currencies that will allegedly determine the value of the yuan going forward was not disclosed. What sort of band the currency will be allowed to fluctuate within is not at all clear. The 2% revaluation in the currency on Thursday followed by a slight strengthening on Friday week may actually encourage further short-term speculation since most economists believe the yuan is undervalued by roughly 10% to 20%. With $1 trillion of trade transactions each year and hot money capital inflows equivalent to 5% of its GDP, the uncertainty ...
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