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Strategies & Market Trends : Greater China Stocks

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From: Julius Wong	8/12/2011 6:46:11 AM
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Surging Yuan May Signal Boost For Global Recovery By Bloomberg News - Aug 12, 2011 The yuan’s strongest gain in more than three years may herald a new stimulus for a flagging global recovery as Chinese importers get more firepower to buy up goods from slowing economies in the U.S. and Europe. The currency climbed 0.8 percent this week, more than any weekly increase since December 2007, breaking through 6.4 per dollar for the first time in 17 years. Today’s closing price in Shanghai was 6.3895. Yuan forwards had the biggest weekly gain since February 2009. Chinese officials are allowing the currency to appreciate as slowing growth and gyrations in global currencies and stock markets threaten to spark a new recession. Besides countering inflation and accelerating China’s shift to domestic-driven growth, a stronger yuan may also signal a willingness to help shore up slumping confidence in the global economy. “They may want to be seen as stepping up to the plate as the second-largest economy,” said David Cohen, an economist at Action Economics in Singapore who formerly worked for the U.S. Federal Reserve. “Inflation is also a little higher than they would want.” During the global financial crisis, Premier Wen Jiabao’s government halted the yuan’s gains for almost two years, keeping the currency pegged to the dollar until June 2010. It has strengthened more than 6 percent since then. Reasons for allowing gains now include elevated inflation and a surge in the trade surplus in July. bloomberg.com

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