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

To: mishedlo who wrote (31523)	6/6/2005 10:42:10 AM
From: Crimson Ghost	Read Replies (3) \| Respond to of 116555

Influential supply sider Steve Forbes still arguing that the Fed must keep tightening until gold falls below $400.

To: mishedlo who wrote (31523)	6/6/2005 1:10:31 PM
From: aknahow	Respond to of 116555

The Korean Herald's article on the Yuan. Lower than 5% yuan revaluation could prompt massive capital outflow A revaluation of the Chinese yuan of less than 5 percent could prompt massive capital outflow from Asian countries, roiling the financial markets across the region, a local think tank said yesterday. The projection was based on a market consensus that China, under increasing pressure from the United States in recent months, would let its currency strengthen by at least 5 percent in the second half of the year. "Should this not happen or in any case the pace of the revaluation doesn't meet the market expectations, the regional financial markets are likely to experience a massive capital outflow in the short-term," said Park Hae-sik, a research fellow at Korea Institute of Finance, in a weekly brief on the potential risks stemming from the revaluation of the yuan renminbi. Anticipation of stronger Asian currencies has largely induced a massive capital inflow into the region in recent months. International currency traders believe most Asian currencies are considerably undervalued and they expect the currencies to appreciate if China lets the yuan float more freely. Industry experts called for the government to closely watch the movements of foreign capital, particularly speculative investors in the local financial markets, warning against the "extremely volatile" foreign currency and equity markets. Given capital inflow to the regional markets has been significant so far, "the price volatility caused by any capital outflow from the region seems to be inevitable," said Park. His view contrasts sharply with a report released on May 22 by the Bank of Korea that a revaluation of the yuan would benefit the Korean economy on the trade front. If the yuan strengthens 10 percent against the U.S. dollar, the nation's exports are estimated to increase $2.4 billion over the next year, said the central bank. On the condition that the 10 percent rise of the yuan is the most conservative estimate in the global financial markets, exports growth would outpace a $400 million gain in imports The central bank governor, Park Seung, has dismissed concerns that a yuan revaluation would hurt the nation's financial stability in the short term and also hamper growth potential. A revaluation of less than 5 percent would only induce more global capital inflow to China on anticipation of additional revaluation of the Chinese currency, the Korea Institute of Finance's Park said. "Extra capital inflow to China would make a large one-off revaluation of the yuan and consequently exacerbate the overheated Chinese economy," he said. A hard landing for the Chinese economy would deal a severe blow to the regional economy as Asian nations increasingly rely on trade with China. China is Korea's largest export destination. China's government has consistently stated that foreign pressure will not force it to abandon its decade-long fixed exchange regime. The U.S. has demanded that China make a quick move to a more flexible exchange rate, beginning with a 10 percent revaluation of the yuan. (jungmin@heraldm.com) By Kim Jung-min 2005.06.07