A report from Hong Kong states that the yuan is set to fall for about the next six months. The Chinese monetary authorities have signaled they will allow the fall by small amounts in order to make Chinese exports more attractive to foreigners. The China economy is heavily dependent on exports, and a strong yuan discourages sales to foreigners by making them more expensive.
China was criticized by American and European governments last year for purposely undervaluing the yuan in order to support Chinese goods over those in the western nations. In response to this criticism the yuan was allowed to rise for some of last year and into 2008. But, as the chart below shows the last six months the yuan has fallen in dollar terms, as reflected by the Wisdom Tree Chinese Yuan Fund (CYB).
To view the chart and the rest of the article, click here for rayhendon.com.
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