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"Mayhem" as yen rises on reports of renminbi revaluation
The yen and other Asian currencies jumped sharply higher in European morning trade on Wednesday after a report claimed that China was on the brink of revaluing the renminbi. when this does happen, it will send a shock wave around the global economy -- long overdue, but the correction will be a big deal unless it is done very skillfully However the Japanese currency later pared its gains as it emerged the report was based on a disputed translation of a story that appeared in the People's Daily, a newspaper owned by the Chinese Community party. The disputed report claimed that China will widen the trading band of the renminbi, effectively a revaluation, in the coming week. China will allow the renminbi to appreciate against the dollar by 1.26 per cent in a month and 6.03 per cent in the coming year, it was claimed. However Tony Norfield, global head of forex strategy at ABN Amro, said the figures referred to were merely the revaluation implied by the non-deliverable forwards market for renminbi-dollar last week, when a Chinese News Service report that the People's Daily story was based on first appeared. "There was complete mayhem in the market, which shows how sensitive the market is," said Mr Norfield. "However this was a useful trial as to how the market would react if there was a revaluation." Posted by: too true 2005-05-11 |
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