Chinese Revaluation - Impact on Global Markets.NEW YORK, July 27 /PRNewswire/ -- Chief Strategist of http://www.dailyfx.com/ and http://www.chinarevaluation.com/, Kathy Lien, has published the following analysis of China's Revaluation Revaluation
A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. and its impact on Global Markets.
After years of speculation, China has finally dropped its decade long peg to US dollar. As we have been predicting for some time, the one major currency pair that will be impacted the most by the revaluation announcement would be the Dollar against the Japanese Yen (USDJPY) and indeed the pair slid 200 pips or points following China's announcement.
So what did China do?
-- China adjusted the RMB RMB Right Mouse Button
RMB Regional Management Board (USACE)
RMB Rolf Maier Bode (musician, band)
RMB Ren Min Bi (currency of People's Republic of China) peg to 8.11, which is 2% higher in value against the dollar
The pegged value of the RMB has been adjusted to 8.11 from 8.31. This rather modest revaluation of 2.5% will for the most part do little to reverse or relieve the US' burgeoning trade deficit. It does however have significant political and market implications. (See market section)
Immediate pressure on China to revalue its currency should move to the backseat for at least a few weeks. However, despite the move, we would not be surprised to hear some protests from US Senators that the revaluation move was too small and that China needs to make a much more concerted effort to allow the currency to increase in value, especially since 2.5% pales in comparison to the RMB's predicted undervaluation of 30-40%.
-- The daily trading band against the dollar is still 0.3%
China is hanging onto its 0.3% percent trading band against the dollar which means that even with this move don't except a lot of volatility in the currency pair. Also, speculators will probably stick around for a while longer which means that even though China has announced a move on its currency, the topic of revaluation and further steps by China will remain in the limelight.
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Kathy Lien is the Chief Currency Strategist at Forex Forex
See: Foreign exchange Capital Markets. Kathy is responsible for providing research and analysis for DailyFX, including technical and fundamental research reports, market commentaries and trading strategies. A seasoned FX analyst and trader, prior to joining FXCM FXCM Forex Capital Markets , Kathy was an Associate at JPMorgan Chase where she worked in Cross Markets and Foreign Exchange Trading Foreign Exchange Trading or FX Trading, clients are able to hedge against, or speculate upon, changes in the exchange rate of two currencies. For example, a speculator can long EUR/USD in foreign exchange market in order to profit from capturing the appreciation of Euro against the . Kathy has vast experience within the interbank market using both technical and fundamental analysis to trade FX spot and options. Kathy has written for Stocks and Commodities, CBS (Cell Broadcast Service) See cell broadcast. Market Watch, ActiveTrader, Futures and SFO SFO (in Britain) Serious Fraud Office Magazine. She is frequently quoted on Bloomberg and Reuters and has taught seminars across the country. She has also hosted trader chats on EliteTrader, eSignal, and FXStreet, sharing her expertise in both technical and fundamental analysis.
Kindest Regards, Kathy Lien
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