The People's Bank of China Governor Zhou Xiaochuan said today that the Chinese Yuan might be "fine-tuned" to manage the after effect ripples from the global financial crisis which started in Oct 2008.
His comments raised eye-brows because it is not common for Chinese officials to comment on the valuation of the Renminbi as well as the fact that it had been some 18 months since the financial crisis stuck.
Are such comments belated? Regardless of the timeliness of his comments, forex traders would be interested to know the impact of forex market.
Currently, 1 U.
S.
dollar = 6.
826 Chinese yuan and it is very unclear whether the fine-tuning means the appreciation or depreciation of the Chinese Yuan (RMB).
Most analyst expect the yuan to gradually appreciate over time, which several hedge funds expect to see more signs from the Chinese Government before the actual adjustment of the currency value.
One of such signs include selling off US dollar denominated Treasury Bonds, as it is likely that the Chinese Government will want to maximize returns on such Bonds which will devaluated if the Chinese Yuan is appreciated.
Ironically, China, being the largest lender to US (due to China holding the highest value of Treasury Bonds) would destabilise the current economic situation of such massive bonds were disposed.
A catch-22 situation essentially but it is keen observing the trend of bonds disposal as the prelude to the Chinese Renminbi appreciation.
And who knows? The fine-tuning might be a big change eventually.