Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

*** Yuan related post ***

G'morning ml,

Hopefully, this is only the beginning of the revaluation process...
At what level do you think the US$ would trade ninety days after China finally bowed to the pressures and allowed the Yuan to float freely against the no longer almighty buck.

The Chinese have such a good deal for Chinese commerce with the peg to the dollar that they would be foolish to give in without a sustained max blitz from it's trading partners, but should it happen, I would guess that anything over 70/75 would seem optimistic to these old eyes which, btw, through the wonderous talents of Dr James Gills, the best cataract man in the world has in the past two weeks gotten my vision from 20/50 and 20/60 to 20/20 and 20/15 and reduced the Glaucoma prone optic pressures from 20/23 to 11/13.

I can't tell you what a wonder it is to again be able to see the color of a person's eyes from across the room whereas two weeks ago I'd often have some trouble recognizing the person's identity if they were sitting down.
I would recommend him without reservation to anyone who has or is developing cataracts.
http://www.stlukeseye.com/Gills2.asp
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Chinese Yuan Forward Contracts Gain After Snow Backs Wider Band

June 27 (Bloomberg) -- Chinese yuan forward contracts gained in Asia after U.S. Treasury Secretary John Snow said China is considering expanding the range in which the currency can trade.

Chinese authorities ``are considering widening the band,'' Snow said in a television interview with Bloomberg News yesterday. ``That's to be encouraged.'' Snow was more specific about China's currency regime than June 16 when he said China ``is interested in moving toward market-based flexible exchange rates.''

An official at the State Administration of Foreign Exchange, who asked not to be named, said there is no schedule for letting the currency trade freely.

The forward contract's discount widened to a record of 1,850 on June 17 after Goldman Sachs Group Inc. said China may widen the yuan's trading band. The U.S. currency's 14 percent slide against the euro in the past year has weakened the yuan against other currencies, aiding China's exports.

The discount for one-year non-deliverable forwards, which reflect trader expectations of the currency's future value, was 1,150 at 4:11 p.m. in Hong Kong, from 1,050 late yesterday, according to Bloomberg data. The discount implies the Chinese currency, if freely traded, would strengthen to 8.1620 to the dollar.

China will allow the yuan to move by 2.5 percent above or below its peg by year-end, Goldman said in the report earlier this month.

Buying on Snow

Traders ``may again use his comments to buy,'' the forward contracts, said Tommy Ong, vice president of treasury and markets in Hong Kong at Dao Heng Bank Group Ltd., a unit of DBS Group Holdings Ltd., Southeast Asia's biggest bank. There probably won't be any change in China's yuan policy for at least six months, he said.

The discount on yuan forwards may widen to 1,300 today, Ong said, implying an even stronger outlook for the currency. The exchange rate has been valued at 8.2770 to the U.S. dollar since 1995.

China restricts movement of the yuan against the dollar to 0.3 percent above and below the fixed rate. The dollar's decline helped China's exports increase in May at the fastest pace in four months, the People's Daily newspaper said.

The Asian nation recorded a $103 billion trade surplus with the U.S. last year, the biggest trade gap ever between two countries. U.S. manufacturers say China is deliberately holding down the value of its currency, boosting exports at the expense of U.S. jobs.

The Coalition for a Sound Dollar, a group of 60 U.S. trade and business associations, said last week China's accumulation of $316 billion in foreign reserves demonstrates it's buying dollars to weaken the yuan.

Snow's comment ``is another attempt by the U.S. to put more pressure on China, or at least make right noises,'' said Mike Moran, a Hong Kong-based economist at Standard Chartered Bank., a unit of Standard Chartered Plc, which makes 80 percent of its profit in Asia. Still, yuan movement may be limited because ``the market is certainly coming around to the idea that it's not really up to the U.S. to decide China's foreign exchange policy.''

Forwards are agreements in which assets are traded at fixed prices for delivery later. Yuan forwards are termed non- deliverable because they are settled in dollars, not local currency.

http://quote.bloomberg.com/apps/news?pid=10000080&sid=as9B1x4Nu1YQ&refer=news_index