Copyright 2005 The Financial Times Limited LexisNexis(TM) Academic - Document
LexisNexis(TM) Academic - DocumentCopyright 2005 The Financial Times Limited
Financial Times (London, England)
July 23, 2005 Saturday
London Edition 1
SECTION: LEX COLUMN; Pg. 14
LENGTH: 248 words
HEADLINE: Renminbi THE LEX COLUMN:
BODY:
It's a regime change, but not as we know it. The world's biggest centrally planned economy has taken a step towards floating its currency.
But as a trigger for a mass revaluation of Asian currencies - a reversal of the 1997 round of devaluations - it does not quite cut the mustard.
Further renminbi revaluation is likely, but speculators will need patience: the new regime is more crawling peg than hybrid float. The 0.3 per cent daily fluctuation up or down already existed - it is not a new feature. The make-up of the new basket is not disclosed, but restricting it to China's three biggest trading partners would give roughly equal weighting between the dollar, euro and yen. That looks too radical, given the extent of trade with dollar-bloc countries. Instead, near term, the dollar will probably be the main determinant.
The response of regional currencies was fittingly half-hearted. Yesterday, the yen unwound part of its initial gains. There is room for appreciation - recent dollar strength means Asian currencies lagged the renminbi by between 3 per cent and 10 per cent in the past six months - but it will probably be modest. Renminbi appreciation does little to blunt China's cost advantage over most of its neighbours. Asian central banks can afford to intervene if appreciation runs beyond their comfort levels: reserve accumulation has slowed, and benign inflation reduces the need for hefty sterilisation. Asian currencies, like the renminbi, are set to crawl not sprint.
LOAD-DATE: July 22, 2005
Financial Times (London, England)
July 23, 2005 Saturday
London Edition 1
SECTION: LEX COLUMN; Pg. 14
LENGTH: 248 words
HEADLINE: Renminbi THE LEX COLUMN:
BODY:
It's a regime change, but not as we know it. The world's biggest centrally planned economy has taken a step towards floating its currency.
But as a trigger for a mass revaluation of Asian currencies - a reversal of the 1997 round of devaluations - it does not quite cut the mustard.
Further renminbi revaluation is likely, but speculators will need patience: the new regime is more crawling peg than hybrid float. The 0.3 per cent daily fluctuation up or down already existed - it is not a new feature. The make-up of the new basket is not disclosed, but restricting it to China's three biggest trading partners would give roughly equal weighting between the dollar, euro and yen. That looks too radical, given the extent of trade with dollar-bloc countries. Instead, near term, the dollar will probably be the main determinant.
The response of regional currencies was fittingly half-hearted. Yesterday, the yen unwound part of its initial gains. There is room for appreciation - recent dollar strength means Asian currencies lagged the renminbi by between 3 per cent and 10 per cent in the past six months - but it will probably be modest. Renminbi appreciation does little to blunt China's cost advantage over most of its neighbours. Asian central banks can afford to intervene if appreciation runs beyond their comfort levels: reserve accumulation has slowed, and benign inflation reduces the need for hefty sterilisation. Asian currencies, like the renminbi, are set to crawl not sprint.
LOAD-DATE: July 22, 2005
posted by Eastlaw at 12:51 AM
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