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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: John Carragher who wrote (29721)	5/10/2005 8:37:55 AM
From: Knighty Tin	Read Replies (1) \| Respond to of 116555

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To: John Carragher who wrote (29721)	5/10/2005 9:44:31 AM
From: mishedlo	Respond to of 116555

China warns on effects of yuan revaluation: report Tuesday, May 10, 2005 12:04:00 PM afxpress.com TOKYO (AFX) - Investors waiting for China to loosen its renminbi yuan's peg to the dollar got a hint Tuesday that such a move might not be forthcoming, when a Chinese government bureau warned of the consequences of such a move China's National Bureau of Statistics said that a 15% appreciation of the yuan "would turn China's export growth negative this year," according to a research report posted on the bureau's Web site, AFX-Asia reported. That would be the first drop since 1983 The bureau forecast that a more moderate revaluation of 3.0% to 5.0% would lead to export growth falling this year to less than 10.0%, compared with last year's growth of 35.4% China has effectively pegged the yuan to the dollar around 8.28 since June 1995. While most strategists expect China to eventually loosen the peg, most likely by widening the band in which the currency is allowed to trade, the timing of the move is still up in the air - and hotly debated in research institutes, boardrooms, and trading floors around the world The NBS research report said a big yuan revaluation could seriously damage the country's balance of trade and would lead to large outflows of capital It said "hot money" inflows from investors who have been betting on a currency appreciation would reverse course in the event of the long-anticipated move Such capital outflows could lead to a short-term depreciation of the yuan The NBS predicted imports to grow this year by between 5% and 10% if there is no revaluation, or the revaluation happens later this year The latest research from the Chinese Academy of Social Science forecast that a 10.0% appreciation of the yuan would lead to around a six percentage point drop in export growth this year, AFX reported It also estimated the revaluation would lead to the loss of 2.7 million jobs this year and another three million in 2006 Critics of China's foreign exchange system say the undervalued yuan gives Chinese goods a competitive price edge in overseas markets, and has therefore led to the loss of hundreds of thousands of American jobs. On Monday, Treasury Secretary John Snow kept the pressure on China, telling reporters in Hartford, Conn., that it is time for China to make its currency more flexible. But most strategists in Asia say China is unlikely to heed such calls, and won't act until it determines such a move is in its own best economic interests Inflation appears to be more under control in China after surging last year. China's consumer price index rose 2.8% on year in the January-March quarter. Therefore, China doesn't have an acute need for the tightening effects of a stronger currency. "I don't think the Chinese government will revalue the yuan this week or so. It is a highly political decision. At this moment China is unlikely to get anything in exchange for a revaluation, politically," said Toru Umemoto, chief currency strategist at Barclays Bank in Tokyo "China dislikes the idea of changing its policy in response to overseas pressure," Umemoto said Some investors have their calendars marked on May 18 as a possible date for a revaluation announcement. On that day, China will introduce more currency trading, and allow the yuan to trade against the euro, pound, yen, Swiss franc, as well as the Australian, Canadian and U.S. dollars. As many believe that China will first allow the yuan to trade against a basket of currencies before it is ever allowed to freely float, the introduction of such a system is a necessary first step, and will provide a test platform for the yuan's convertibility

To: John Carragher who wrote (29721)	5/10/2005 9:51:37 AM
From: mishedlo	Respond to of 116555

Australia sees more flexible China exhange rate as having limited benefits Tuesday, May 10, 2005 11:15:43 AM afxpress.com SYDNEY (AFX) - If China adopts a more flexible exchange rate to assist the world economy it will have only a "limited impact on global imbalances," the Australian government claimed in its federal budget for 2005-06 It said any liberalisation of the capital account should be "approached cautiously" and in a veiled criticism of China's banking system, it said any changes should occur with a "further strengthening" of the financial system The tenth budget of the center-right coalition, which retained office at an election last year, states that reforms to China's financial system should be complemented by changes elsewhere in its economy Australia's good economic fortune which has seen it enjoy 14 years of unbroken growth has been partly due to China's voracious appetite for minerals such as Australia's coal and iron ore The budget points out that while China's economic growth is likely to slow to a more sustainable rate, there seems to be "considerable uncertainty about the timing and extent of the slowing." Japan is Australia's largest trading partner and the budget suggests that it's economy has improved “significantly” in recent years with a suggestion that structural reforms have improved business sentiment