Chinese Yuan on the Road to Revaluation

Chinese yuan will definitely see a some kind of revaluation against dollar and other major currencies soon. Jean-Claude Trichet spoke today about his latest endeavor to convince China government to make confident steps towards stronger yuan policy. From his words the Chinese central bank understands the concerns of their trade partners and the steps will be done eventually to make yuan less depreciated.
Trichet said that China’s authorities will now be more motivated to make monetary policy changes, but he is still sure that China could do much more in order to make yuan appreciate faster against European currency. Exporters from European Union and producers inside the Union suffer from cheap yuan and currently strong euro, risking to slowdown the economy growth.
Now People’s Bank of China has to decide – how to change the yuan’s trading policy in order to strengthen yuan against world currencies. One possible way to do this is to revalue yuan, changing the current price higher, thus giving the Chinese Forex trading system a new trading zone but within the same boundaries of ±0.5% daily. Another way is to change the daily limit of price change from ±0.5% to about ±1%, increasing the yuan’s rate volatility and making its float more free.
Chinese yuan’s increased for more than 5% in value against dollar since the start of 2007, but it has depreciated for about 6% against euro at the same time.

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