Sunday, March 7, 2010

China Ready to Drop Dollar Peg?

China U.S. Dollar Peg

Although it may not happen quickly, it looks like China has decided they're gradually going to remove the dollar peg with the renminbi, saying it was a temporary measure to deal with the economic crisis.

It's hard to tell if this is a consensus with the Chinese, or one faction making an assertion while the others are holding to a policy of needing a stable exchange rate between China and the U.S.

Confirmation from the Chinese government hasn't come yet after Zhou Xiaochuan, governor of the People’s Bank of China, made the comments of changing the peg sometime in the near future.

Of course when thinking of the Chinese, we must take into consideration their idea of what "near" means and what ours is. In this case, they seem to be thinking of a period of two to three years, tying it into the low levels of Chinese exports since the global economic crisis began.

China U.S. Dollar Peg

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