Chinese curency Yuan will slowly rise as Chinese central bank maintains stability - US Treasuries will be the gainer
Alex Peterson
Oct. 1, 2006

The central bank of China is eager to maintain stability in its currency as measures are taken to make the currency flexible. Chinese currency Yuan will slowly rise as Chinese central bank maintains stability.

China's biggest problem is its rural population that can get hurt if Yuan goes up too fast.

China plans to take its currency to flexible open market. But in doing so its central bank will take the same posture that Bank of Japan (BOJ) took in the last several years. BOJ restricted the rise of Yen through open market buying of yen and making speculators sweat like anything. China will keep selling Yuan against US Sollar as the open market forces take the currency higher. Like Japan, Bank of China will keep buying its own currency to put some temporary lid on the appreciation levels of Yuan and protecting the currency from speculators within and outside China. The US dollars from the trades will be invested in US Treasuries.

The net gain of all this will lower long rates in US and higher prices for US Treasuries.

Chinese curency Yuan will slowly rise as Chinese central bank maintains stability - US Treasuries will be the gainer
Alex Peterson
The central bank of China is eager to maintain stability in its currency as measures are taken to make the currency flexible. Chinese currency Yuan will slowly rise as Chinese central bank maintains stability.
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