Thursday, July 21, 2005
Yuan Unpegged - 072105
China drops yuan-dollar peg, to price vs. basket : "The Chinese government on Thursday announced its long-awaited reform of its currency, saying it's dropping its yuan-dollar peg in favor of one vs. a basket of currencies. The government also lifted the value of the currency by more than 2%.
'The People's Bank of China will make adjustment of the renminbi exchange rate band when necessary according to market development as well as the economic and financial situation. The renminbi exchange rate will be more flexible based on market condition with reference to a basket of currencies,' it said.
China said it's adjusting the exchange rate to 8.11 yuan per dollar; overnight, the dollar traded at 8.2765 yuan overnight.
The move gave a boost to Asian currencies, with the Japanese yen soaring 1.7% against the dollar. One dollar was last worth 110.89 yen.
The Korean won appreciated 0.9% against its U.S. counterpart.
The daily trading price of the dollar vs. the yuan will continue to be allowed to float within a band of 0.3%, while the trading prices of non-U.S. dollar currencies will be allowed to move in yet-to-be announced bands, it said in a statement released on its Web site.
The Bush administration and the U.S. Congress have long complained that an artificially low yuan has boosted Chinese exports."