Posted on April - 16 - 2010
Yuan move will benefit Asia
TOKYO – SPECULATION of an imminent yuan revaluation has boosted other Asian currencies against the dollar recently, reflecting the region’s world-leading recovery from recession, say analysts.
With a move by Beijing to let the yuan appreciate against the dollar seen as increasingly likely in the near future, emerging Asian economies that compete directly with China are in line to benefit the most, they say.
‘A Chinese currency revaluation would boost the export industries of countries that have trade relations with China,’ said Yunosuke Ikeda, senior forex strategist at Nomura Research Institute. ‘Generally speaking it would help China’s neighbours, while having little negative impact on the Chinese economy.’
Despite rising against the euro, the dollar has fallen against a basket of Asian currencies this year. It is down 4 per cent against the Australian dollar, linked to a commodity-rich economy driven by Chinese demand for raw materials. The Korean won, the Malaysian ringgit and the Indian rupee in particular have rallied strongly. The dollar is down 6 per cent against the ringgit, 5 per cent against the won and 4 per cent against the rupee.
Asian currencies are also likely to bounce from anticipation that other Asian central banks are moving to tighten their monetary policies, unlike their counterparts in more advanced economies, say analysts.
Singapore on Wednesday revalued its currency – the city-state’s principal monetary tool – prompting speculation that China and South Korea may be next in line. ‘Given this expectation, firm risk appetite, and more follow-through from Singapore’s foreign exchange move, the outlook for other Asian currencies remains bullish,’ Credit Agricole analysts said.
Pressure is now growing on Beijing to raise interest rates and loosen currency controls after official data showed on Thursday that the economy grew at a red-hot 11.9 per cent in the first three months of the year. — AFP
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