China has begun to prepare the ground publicly for a shift in exchange rate policy, days after the US Treasury said it would postpone a decision on whether to name China a “currency manipulator”.
A move to revalue the CNY would be less significant for the major currencies at the moment than say a year ago, when the market was quite concerned about dollar weakness spinning out of control.
When the dollar was weak, a move by China to strengthen the currency would have eased fears that the dollar would continue to slide agiant the major currencies since it was unable to fall againt the Yuan and other Asian currencies that are closely managed to keep in-line with the Yuan.
AUD might be the outlier, potentially weighed down by a Chinese currency shift, if the market believes it would result in slower Chinese growth and lower raw materials demand…
