Good morning, its Wednesday May 11th, the 131st day of 2005, and a day of much speculation in world currency markets on reports not confirmed by officials that China will revalue its currency perhaps as early as next week.
Rumour or trial balloon?
- April 30 – China People’s Daily – China not planning to revalue yuan China does not plan to revalue its currency, the yuan, during next week’s Labor Day holiday, a central bank spokesman said Friday, quashing rumors that such a change was imminent. “As far as we know, there’s no adjustment expected in the yuan exchange rate,” Bai Li, spokesman for the People’s Bank of China, told Dow Jones Newswires. A brief wave of speculation over a possible shift in currency policy roiled regional share and currency markets Friday. Such rumors have been circulating in the past week, despite official denials that major changes were pending. Beijing says it will eventually let the yuan trade freely on world markets, but that doing so immediately would damage the country’s frail banks and financial industries.
- May 10 – Economic Times – US turns up the heat on China to revalue remninbi US officials also have said they understood China needed time to prepare for such a switch. But the administration toughened its rhetoric last month. Treasury secretary John Snow let it be known the US feels that China has made all the preparations necessary and could switch to a flexible exchange rate. Mr Greenspan told a congressional committee that China’s current system represented a threat, including higher inflation, to the Chinese economy.
- May 11 – Bloomberg – Yen Gains; People’s Daily Says China to Revalue Yuan Next Week The yen rose against the dollar and the euro after the People’s Daily, a Communist Party-owned newspaper, said that China will revalue its currency next week after keeping it pegged for the past decade. China will make the change after meeting U.S. officials, the paper said in its English-language online edition, without saying where it got the information.
Or mistake?
UBS research noted that “The Bloomberg report is based on what appears to be a mistranslation on the People’s Daily’s English-language web site, as the 1m and 1y bands given correspond closely to the NDF rates.”2
One long-time investor in Asian markets notes:
``The best time I believe in their view would be when the reaction wasn’t so great,’’ said Mark Mobius, who manages $13 billion of emerging market stocks at Templeton Asset Management Ltd. ``They don’t want to hand a gift to speculators.’’ Mobius said China may shift the peg ``at any time.’’ An appreciation of the yuan would help other Asian currencies, which are ``undervalued,’’ make gains against the dollar, he said.
Speculation on the revaluation of the yuan has been continuing for months, and is in no small way creating choppy trade for the US dollar.
``The significance of everything has waned relative to the situation in China,’’ said Steve Barrow, a currency strategist at Bear Stearns Cos. in London. ``The bias is most definitely for a lower dollar.’’ He spoke in an interview on May 6.
Japan’s currency may rally to 99 versus the dollar at year- end, according to the median forecast of 49 analysts, traders and investors surveyed by Bloomberg News between March 29 and April 6. The estimates were based partly on expectations the yuan would appreciate.
``If China moves, they can all basically move,’’ said Bankim Chadha, head of macro currency research in New York at Deutsche Bank AG, the biggest foreign-exchange trader. ``It becomes a little harder for Japan’’ to stem a rally in the yen, and the central bank may let it appreciate to 95 per dollar, he said.1
In addition to speculation on China’s intentions, today features a dollar-moving event with the release of trade balance figures for March, which by all accounts most observers expect to show yet another increase to new, historic, highs in the US trade deficit.
US Market Calendar
- 7:00 am: MBA Purchase Applications
- 8:30 am: International Goods & Services Trade Balance – March
- 10:30 am: Weekly Petroleum Data
- 12:00 pm: Federal Reserve Governor Susan Schmidt Bies speaks at a meeting of the New York Association for Business Economics
- 2:00 pm: Treasury Budget
- 5-year note auction
Canadian Market Calendar
- 8:30 am: Merchandise Trade Balance – March
- Ontario Budget
Earnings and the Federal Reserve
For earnings highlights, please see today's WSJ Earnings Calendar.
For a list of upcoming speeches, congressional testimony, Federal Open Market Committee material, and statistical releases, please visit the What's Next page of The Federal Reserve Board website. Recently released Federal Reserve Board material, including market moving FOMC decisions and speeches by members, will be found on their What's New page.
1 Yen Gains; People’s Daily Says China to Revalue Yuan Next Week
05.05.11 06:55 #