China scrapped the Yuan's peg to the USD just a few minutes moments ago and tied the CNY to a basket of currencies. The new Yuan rate versus the US Dollar revalues the currency by 2.11%, to 8.1100 per USD as of 1100 GMT.

(See the central bank web site: www.pbc.gov.cn)

Under the previous policy, the CNY was kept at 8.2765 per USD, a virtual peg that led the US and other countries to complain that China's currency was unfairly undervalued. The changes came amid intense speculation that Beijing would overhaul its currency regime, which had been basically unchanged since the 1997/98 Asia crisis.

Please find the official announcement here:




Public Announcement of the People's Bank of China on Reforming the RMB Exchange Rate Regime
With a view to establish and improve the socialist market economic system in China, enable the market to fully play its role in resource allocation as well as to put in place and further strengthen the managed floating exchange rate regime based on market supply and demand, the People's Bank of China, with authorization of the State Council, is hereby making the following announcements regarding reforming the RMB exchange rate regime:

1. Starting from July 21, 2005, China will reform the exchange rate regime by moving into a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. RMB will no longer be pegged to the US dollar and the RMB exchange rate regime will be improved with greater flexibility.

2. The People's Bank of China will announce the closing price of a foreign currency such as the US dollar traded against the RMB in the inter-bank foreign exchange market after the closing of the market on each working day, and will make it the central parity for the trading against the RMB on the following working day.

3. The exchange rate of the US dollar against the RMB will be adjusted to 8.11 yuan per US dollar at the time of 19:00 hours of July 21, 2005. The foreign exchange designated banks may since adjust quotations of foreign currencies to their customers.

4. The daily trading price of the US dollar against the RMB in the inter-bank foreign exchange market will continue to be allowed to float within a band of ??/span>0.3 percent around the central parity published by the People's Bank of China, while the trading prices of the non-US dollar currencies against the RMB will be allowed to move within a certain band announced by the People's Bank of China.

The People's Bank of China will make adjustment of the RMB exchange rate band when necessary according to market development as well as the economic and financial situation. The RMB exchange rate will be more flexible based on market condition with reference to a basket of currencies. The People's Bank of China is responsible for maintaining the RMB exchange rate basically stable at an adaptive and equilibrium level, so as to promote the basic equilibrium of the balance of payments and safeguard macroeconomic and financial stability.



(Source: http://www.pbc.gov.cn/english/detail.asp?col=6400&id=542)

What are the implications of this?

are you a businessman , if yes are you dealing with china ?

if yes , you would know the implications !

No, I have no idea.

Translation the US $ is collapsing against the Euro , as the Euro is the single currency of the globes greatest single market .

Translation the US $ is collapsing against the Euro , as the Euro is the single currency of the globes greatest single market .

Truth be told, the Dollar is rebounding against the Euro, but sometimes facts are meaningless to some. This means one big thing for us Americans . . . products coming from China will be more expensive, meaning greater costs for goods, but also allowing American businesses to more easily compete with Chinese imports.

-Will

There's another aspect to be considered apart from the terms of trade. If the Yuan establishes a reputation as a strong currency, it becomes worth holding -- which in turn makes it more attractive as a trading currency. So a businessman in South Korea exporting to Singapore begins to think about doing the deal in Yuan instead of (as at present) US$ or Yen.

This further increases demand for the Yuan and tends to push the exchange rate progressively higher. Although this is bad news for Chinese exporters, it is very good news for Chinese investors who begin to acquire substantial business interests in other countries. And this is already happening of course!

In time, China finds itself in competition with the US in the business of what Maoists used to denounce as "imperialism" -- the economic domination of client states. The ideological battle for influence which the US used to fight with the Soviets is superseded by an old-style commercial struggle for economic colonies. Begin to follow events in, say, Venezuela if you wish to see what the future holds.

. . . products coming from China will be more expensive, meaning greater costs for goods, but also allowing American businesses to more easily compete with Chinese imports.

Which American business? They are all gone to China... :D. And greater cost of goods mean...no savings...dip in to grandma's dime jar....