Jul 21, 2005

Asian Currency Revaluations

China and Malaysia both moved their currency pegs last night. The move in the Renminbi was 2% which is smaller than the 5-10% most analysts had been mentioning but the impact could be quite large if other countries follow suit.

From the FT:
The effect of China’s move was expected to spread to other Asian currencies as other countries in the region were set to decouple their currencies from similar pegs to the dollar to make them more competitive.
Shortly after China’s announcement, Malaysia said it would alter its peg and allow the ringgit to fluctuate freely and Singapore, whose currency is tied to a trade-weighted basket of currencies, was also due to make an announcement.
Makes me wonder if the story won't continue to unravel for the next couple of weeks as other government reaffirm or change policy. That is a different story than the smaller than expected Chinese move in the headlines and it is what I will be watching for.

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