21 June 2010

Currency Peg Between Yuan and US Dollar to Ease

The People's Bank of China (China's central bank) over the weekend made a surprise announcement: it intends to ease up on its peg against the US dollar.

Markets reacted with a jump in the yuan and Asian stocks, however these cooled somewhat as it became clear the Bank does not intend to make any fast changes. Monday's daily rate remained unchanged since Friday - proving that while a change is afoot, it will very much be at their own pace.

China's currency peg with the US dollar had put China under intense strain in its relationship with the US since mid 2008. The decision to ease up has come just ahead of the next G20 meeting in Toronot, Canada and many hope that trade and political relationships will improve as a result.

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