A Soft Landing For China's Yuan

Published: Wednesday, 07/27/2005 12:00 am EDT

Last week, the Chinese central bank, the People's Bank of China, made a surprise announcement that the yuan has been unpegged from the U.S. dollar and moved to a managed floating exchange rate regime based on a basket of currencies. At just 2.1 per cent, the revaluation was considered to be about as small as it could possibly be, but the much-anticipated removal of the peg is seen as the first step in a gradual appreciation of the yuan in the future. Prices in the currency forward markets anticipate the yuan to rise a total of 9 per cent over the next 12 months.

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