Chinese Yuan Rise Against Dollar

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Chinese Yuan Rise Against Dollar

Friday, July 22nd, 2005 Subscribe To Our Feed

Officials at the Chinese Central Bank announced the drop of its current peg on exchange rate. A small appreciation of 2% by Yuan/RMB against was put into effect by July, 21, 2005.

Many economists suggest that the appreciation of Chinese RMB will gradually push up the long term interest rate in the US, which would be a negative for the booming housing market. On the other hand, a stronger RMB could mean more capital investment flow from China to the US if/when people think that Chinese Yuan has reached its full appreciation potential.

Given that China also needs to cool down its economy to avoid a hard landing on one hand, it also needs to control the continued inflow of capital into China, on the other hand, the effect of today’s move on China and US is not totally clear.

Economist Nouriel Roubini debates with David Altig on the issue of the Chinese currency revaluation in a Wall Street Journal Econoblog.

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