China revalued the yuan, the euro is rising, Dow Jones Industrial is preparing to achieve maximum

Yuan revaluation and DJIA climding

In brief: China has said that he was ready to go to the revaluation of the yuan exchange rate stable euro, Dow Jones is preparing for a new record

China’s claim of first revaluation of the yuan becomes a signal for growth in the euro today. In addition, the weak yuan great pleasure bulls on the blue chip Dow Jones Industrial Average. Dow index could rise to record levels today. Buyers expect a record trading volume on the NYSE today. Dow Jones Industrial Average may be the growth leader in the stock market. Thus, the euro-dollar opened today with gepom up after Saturday China announced that it will allow its currency to become more “flexible” and signaled the possibility of ending two years of pegging the Yuan to the dollar.

The decision was taken after the economy has shown improvement, said in a statement the central bank, placed on its website. It was not just the dates. It is not expected simultaneous revaluation of the yuan, the bank’s management stresses that “there is no reason for the widespread appreciation of Yuan, and the daily trading range for the yuan to remain stable at 0,5%. It is noted that “it is desirable to further modify the RMB exchange rate regime and increase the flexibility of the exchange rate. Commentators believe that China took this step in order to gain time and to withdraw the issue of the yuan to the agenda of the meeting Twenty Grand, which will be held this week. Thus, if the U.S. president Obama called the course of China “constructive step”, the American parliamentarians, who have long gathered to impose sanctions on Chinese exports to the U.S. for “currency manipulation”, called China’s actions “insufficient”. Indeed, this morning, Bank of China has left the target rate of the yuan stable, and at that level, dollar-yuan fell by 0.36% to 6.80 yuan per dollar. However, it is thought that tomorrow, the Chinese Central Bank will lower the target rate of the dollar-yuan, to reflect current changes in the market.

A pair of euro-dollar today with the opening shows a very high volatility. Opened with polufigurnym gepom up at around 1.2416, the euro managed to rise to the current moment of 1.2467, falling to 1.2368, again rise to 1.2466 and fall to the current 1.2387. Other European currencies, and commodity currencies also showed an increase in the dollar. In a big plus today are the stock markets (futures on the Dow shows a growth of 1.33%), the price of oil (a barrel mark WTI has risen to 78.29, +1.44%). The analysts write that the revaluation of the yuan – positive news for the world economy, which will increase risk appetite. Indeed, even the dollar-yen, who are supposed to, as the Asian currency goes up the dollar with the yuan, which opened with a logical gepom down, and showed a minimum at 90.01, later in the growing optimism rose to 91.45. In our view, the revaluation of the yuan – obviously antidollarovy factor, as it reduces the purchasing power of the dollar. Here are just a factor that might play later. In 2005, the euro continued to fall even after the revaluation of the yuan, which has led to a further fall in the euro-yuan. Earlier we wrote in the review that the yuan revaluation far better Europe than the U.S..

The Past in the last six months, the fall of the euro-dollar (at a fixed dollar-yuan) was actually a hidden revaluation of the yuan against the euro (which directly benefit European producers). Direct same revaluation yuan to the dollar will fall even more euro-yuan. If in December the euro-yuan fell from 10.33 to a minimum at 8.09 (now 8.42 rate, and before the 2008 crisis, the euro-yuan and reached 11.20), the revaluation of the yuan, especially if the euro-dollar continues to fall, will cause an even greater fall in the euro-yuan . Technically, the euro-yuan can go back to 7 yuan per euro, levels of 2001. Obviously, this rate of the yuan for China in any long term is unacceptable, given that the euro area – the main trading partner of China (and not the U.S., as one might think). The Past in the last six months, the fall of the euro-dollar (which he could easily stop, having huge reserves of U.S. dollars) to China means a direct loss of competitiveness. Now, going to the revaluation of the dollar to the yuan, China, causing a further damage. It is obvious that compensate for the damage (as in 2005) will be possible only through the inverse movement up the euro-dollar. Moreover, due to the revaluation of the yuan to the dollar (and depending on its size) Eurozone will be able to withstand even greater rate of euro-dollar (than 1.40 in 2005 and 1.60 in 2008). Meanwhile, China is suffering not only the weakness of the euro-dollar, but also going to put up with the revaluation of the yuan. Puts up because at this point, obviously, there is an agreement at the highest level. But the question of when China will again sell at the market dollars and the euro-dollar back up – this is only a matter of time. So far, China has not prevented an ambitious campaign humbled the euro, reaching the last six months. Probably, he will suffer for some time before the situation will come to some logical conclusion. We continue to wait decline of the euro to new lows in coming weeks.

Anrey Torbinski
2010-06-21 13:25, Economics.

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