Saturday, April 30, 2005

Temporary yuan float

This is a weird story - the value of the yuan was allowed to float up slightly from 8.276 to 8.270 to the dollar for 20 minutes on Friday. The Times article suggest it may have been due to human error, but other sources report that the unpegging was deliberate.

NYT: Traders used to seeing a flat line on their screens day after day for the value of the yuan were especially transfixed by the brief surge because it came the same day that a state-run newspaper, The China Securities Journal, ran an article on its front page that seemed to depart from previous government statements ruling out any shift in currency policy soon.

The article asserted that China's financial system and currency regime were finally ready for the yuan to rise, provided that the rise was only a few percentage points.

The People's Bank of China, the central bank, issued a public denial by midafternoon that it had received any formal instructions from the country's political authorities to push the yuan to a new level. But the brief movement of the yuan prompted some economists to say that China may have been testing its ability to manage a small fluctuation in the value of its currency, as a possible preparation for managing an eventual change in the yuan's value.

From a comment on this housing bubble blog: "BTW, I just read a news from China saying China's central bank is going to unpeg Chinese yuan for a few hours before most Chinese start taking the week-long May 1 holidays in China. Apr 30 is like the Friday after Thanksgiving in China that most traders and brokers are on vacation, so volume is usually very light and the best time to test the market."

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