LOL --[China may revalue yuan when US quiet, says Tang]
May 10, 2005
China will revalue its currency "when the Americans stop being so noisy about it,'' Hong Kong's Financial Secretary Henry Tang told reporters in Bangkok Monday.
China is being pressed by US Federal Reserve Chairman Alan Greenspan, US Treasury Secretary John Snow and Japanese Finance Minister Sadakazu Tanigaki to relax the yuan's peg, which has been set at 8.3 to the dollar since 1995. Letting the yuan appreciate would give the People's Bank of China, which sells yuan to prevent it from strengthening, more scope to raise interest rates to cool an economy that grew at 9.5 percent in 2004 and at the same pace in the first quarter.
``My guess [is] that the surprise will be the timing, when the Americans stop being so noisy about it,'' said Tang, who is in Bangkok to promote tourism to Hong Kong. ``That's when you have to be careful.'' Hong Kong, which counts the mainland as its top trading partner, expects the revaluation to ``have a fairly minor effect'' on its economy because of its separate currency and autonomous central bank, Tang said.
It will cause some acceleration in inflation, while also boosting Hong Kong's competitiveness against cheaper Chinese-made goods, he said in response to questions.
China's Deputy Finance Minister Li Yong said May 6 that the central government is ``working very hard'' to revise its exchange-rate system, but that no decision has been made on the format or timing of the revision.
Discounts on dollar-yuan non-deliverable forwards somewhat narrowed Monday as market participants closed their short positions on disappointment no changes were made to China's exchange rate regime during the weeklong Labor Day holiday.
Prebon Yamane was quoting a bid/offer discount on the benchmark one-year dollar-yuan NDF late Monday afternoon of 4,750/4,600, narrower than 4,900/4,700 Monday morning.
Market participants had been speculating China might announce changes to its foreign exchange regime while financial markets were closed from May 1-7 for Golden Week. All China's financial markets resumed normal trading Monday. BLOOMBERG
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