User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday July 25, 2005 - 21:48:44 GMT

Share This Story:
| | Email

Chinese Revaluation - An In Depth Look At What It Means For The Markets

Chinese Revaluation - An In Depth Look At What It Means For The Markets

By Kathy Lien, Chief Strategist of and

After years of speculation, China has finally dropped its decade long peg to US dollar. As we have been predicting for some time, the one major currency pair that will be impacted the most by the revaluation announcement would be the Dollar against the Japanese Yen (USDJPY) and indeed the pair slid 200 pips or points following China’s announcement.

So what did China do?

- China adjusted the RMB peg to 8.11, which is 2% higher in value against the dollar

The pegged value of the RMB has been adjusted to 8.11 from 8.31. This rather modest revaluation of 2.5% will for the most part do little to reverse or relieve the US’ burgeoning trade deficit. It does however have significant political and market implications. (See market section) Immediate pressure on China to revalue its currency should move to the backseat for at least a few weeks. However, despite the move, we would not be surprised to hear some protests from US Senators that the revaluation move was too small and that China needs to make a much more concerted effort to allow the currency to increase in value, especially since 2.5% pales in comparison to the RMB’s predicted undervaluation of 30-40%.

- The daily trading band against the dollar is still 0.3%

China is hanging onto its 0.3% percent trading band against the dollar which means that even with this move don’t except a lot of volatility in the currency pair. Also, speculators will probably stick around for a while longer which means that even though China has announced a move on its currency, the topic of revaluation and further steps by China will remain in the limelight.

- China will move to a managed float against a basket of currencies

This is the real story. China is planning to move to a managed float against a basket of currencies. Not many details have been disclosed on this front but the People’s Bank of China has written the following on their website: “the trading prices of the non-US dollar currencies against the RMB will be allowed to move within a certain band” - which will be announced later by the PBoC. We suspect that China will take an approach similar to that of Singapore, which is to float their currency against a basket of other currencies within a tight trading band while not disclosing the exact percentage make-up of the basket to prevent speculators from attempting to manipulate their currency. Given that China exports a large percentage of its goods to not only the US, but also the European Union and Japan, the basket would naturally have to include Euros as well as Japanese Yen. This in of itself could be very positive for both of those currencies. Also, if you recall, those currencies were indeed apart of the currencies that China’s internal “interbank” system was trading in May.

What motivates China to do this?

China has many reasons to want to revalue their currency. The most apparent of which is the country’s political motivation to get approval for deals such as Unocal or the new speculation that they may dropping their bid of Unocal for other US oil producers. The US’ time stamp for a move by China in August could be an unwritten agreement between the 2 countries that would pave the way for a buying spree by the Chinese government and Chinese corporations. The revaluation also makes imports cheaper for China. This comes at a critical time when commodity prices are skyrocketing. The revaluation immediately makes prices of commodities such as oil 2.5% cheaper than they were yesterday.

What does it mean for the markets?

Treasuries - China’s move has ramifications for all of the financial markets. The most significant of which will probably be in US treasuries. As the world’s second largest holder of US treasuries, China’s revaluation and move to a basket float significantly reduces their need for US treasuries and could potentially take away a big buyer from the market. If this is the case, it will cause bond prices to slide and long-term yields to rally, which could offset some of the additional pressure on the Federal Reserve to continue raising rates. If China even begins to dump US treasuries, we could see the “yield curve conundrum” begin to fix itself.

Currencies - The reduced demand for US treasuries and the possibility of increased demand for other currencies such as Euros and Japanese Yen could be very negative for the US dollar. Right now, the dollar is holding somewhat steady against the Euro thanks to the fact that China has yet to announce the components within the managed float. Once they confirm that the Euro will be included in the basket, the single currency could skyrocket.

As for the Japanese Yen, which is the proxy for Asia strength, the currency should continue to benefit from news of China revaluation. Malaysia has already followed suit this morning by scrapping their own Ringgit peg and also adopting a managed float. Japan is quite pleased with the move and for the immediate term, it should eliminate any fears of Japanese intervention. The revaluation of the RMB makes Japanese goods more competitive on a relative basis against Chinese goods.

Stocks - The stock market should have a mixed reaction. Shares of companies such as Wal-Mart and Target have and will probably continue to sell-off because the revaluation means that their cost of imports will increase. So Wal-Mart and Target will either have to increase prices or take a cut out of profits. Shares of manufacturing companies that compete against China should rise along with shares of companies that are targets for Chinese acquisition. The revaluation makes its cheaper for Chinese companies to snap up US companies while at the same time possibility giving them more political sway.

Commodities - This could also be very positive for the commodity markets, with the revaluation immediately reducing the cost for commodities.

Is there more to come?

There will definitely be more to come in the world of revaluation. China has to still announce the details of their managed float against a basket of currencies. This announcement could result in another sharp move in the currency market. The 2.5% revaluation is modest at best - expect continued pressure on China to institute a larger revaluation. The managed float will allow them to gradually adjust the value of the RMB while at the same time maintaining an air of uncertainty and leg up over speculators. News of further Chinese bids on international companies should continue to flow into the market, especially since the country now has a massive amount of US dollars that may not need to be invested in as many US treasuries.


Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."

Actionable trading levels delivered to YOUR charts in real-time.

Register To Test Your Amazing Trader

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Tue 17 July 2018
AA 08:30 GB- Employment
A 13:15 US- Industrial Production
AA 14:00 US-Powell Testimony
Wed 18 July 2018
AA 08:30 GB- CPI
A 12:30 US- Housing Starts/Permits
AA 14:00 US-Powell Testimony
Thu 19 July 2018
AA 1:30 AU- Employment
AA 08:30 GB- Retail Sales
A 14:30 US- EIA Crude
A 12:30 US- Weekly Jobless
Fri 20 Jun 2018
A 12:30 CA- CPI/Retail Sales

John M. Bland, MBA
co-founding Partner,

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube

Max McKegg's Daily Forex Trading Forecasts

Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.

Request a TRIAL of Max's Forex Service.


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.



By using this website, you are agreeing to our Privacy Policy and Terms of Use, and Cookie Policy

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105