Asia embraces new landscape after China's currency move<\/p>\n
Karl Malakunas, Agence France-Presse\/Singapore<\/p>\n
Asia embraced a new financial landscape on Friday after China
\nfinally abandoned its decade-old peg to the dollar, with regional
\ngovernments and analysts widely applauding Beijing for the move.<\/p>\n
Asian currencies were uniformly tipped to appreciate in the
\nlong-term following China's announcement on Thursday that it had
\nabandoned the yuan peg for a managed float against an undisclosed
\ntrade-weighted basket of currencies.<\/p>\n
The region's economic growth rates were also expected to get a
\nboost, according to analysts who further predicted China's move
\nwould inevitably be the start of a long process of the yuan
\nregime becoming more flexible.<\/p>\n
The most immediate impact came in Malaysia, which announced
\nvirtually straight after China Thursday that it had scrapped the
\nringgit's seven-year-old peg to the dollar in favor of a managed
\nfloat.<\/p>\n
"Do not underestimate the significance of a new currency
\npolicy for China," JPMorgan equities strategist Adrian Mowat
\nsaid.<\/p>\n
"An appreciating renminbi would accelerate the current trend
\nof appreciating Asian currencies while boosting the region's
\nreflating economies.<\/p>\n
"Strong currencies should attract capital and discourage the
\nexport of savings, adding to demand for Asian assets."<\/p>\n
The yuan, or renminbi, was revalued at 8.11 to the U.S. dollar
\ncompared to 8.28, a 2.1 percent revaluation.<\/p>\n
It will be allowed to trade 0.3 percent either side of a daily
\nfixed rate and trade in a managed float against a basket of
\ntrade-weighted currencies.<\/p>\n
The move came after sustained pressure from the United States
\nand other Western nations worried about China's perceived trading
\nadvantage with an artificially weak currency unfairly boosting
\nthe nation's exports.<\/p>\n
Japan, the largest economy in Asia and China's biggest trading
\npartner, was one of the first to urge still greater yuan
\nflexibility, while welcoming the first step.<\/p>\n
"A shift to a basket-trading system of the Chinese yuan is
\npositive for the Chinese and global economies," Minister for
\nEconomic and Fiscal Policy Heizo Takenaka told a press
\nconference.<\/p>\n
"While the movement of the Chinese yuan is expected to be
\nlimited in the near-term after the introduction of the new
\ntrading system, it will affect corporate as well as the export
\nactivity of Japan in the mid- to long-term."<\/p>\n
Japan's Chief Cabinet Secretary, Hiroyuki Hosoda, said Tokyo
\n"would welcome it if the yuan becomes more flexible" and Takenaka
\nexpressed similar sentiments.<\/p>\n
"We will be watching closely whether the Chinese monetary
\nauthorities manage the currency trading system more flexibly and
\nin a more market-driven fashion in the long-term," Takenaka said.<\/p>\n
Economists were in no doubt China will loosen the peg further
\n-- the question only being when.<\/p>\n
"(China) will eventually have to allow bigger movement
\nflexibility for the exchange rate to reflect changes in the
\nunderlying currency basket," DBS greater China analyst Chris
\nLeung said.<\/p>\n
"I believe the next step will be the adoption of a wider
\ntrading band."<\/p>\n
Other governments around the region welcomed China's
\nrevaluation, although they also emphasized that the 2.1-percent
\nappreciation in itself would not have a major initial impact.<\/p>\n
"I think it's a positive development because greater
\nflexibility allows the adjustments across economies to be made
\nthrough a more flexible pricing structure," the managing director
\nof Singapore's central bank, Heng Swee Keat, said.<\/p>\n
"In the long-term within Asia, it gives us a better buffer to
\nabsorb any sort of external shocks so those are positive
\ndevelopments for Asian economies and the world economy."<\/p>\n
Australian Trade Minister and acting Prime Minister Mark Vaile
\nsaid China's decision was "good for Australia's exports and
\ninternational markets.<\/p>\n
"China is Australia's second largest export market and the
\nrevaluation of the renminbi will make Australian exports cheaper,
\nhaving a positive impact especially on resources and agriculture
\nproducts," Vaile said.<\/p>\n
In Malaysia, the business community said the yuan-triggered
\nrevaluation of the ringgit was an important step in making the
\nSoutheast Asian nation a more attractive destination for
\ninvestors while helping the local economic liberalization
\nprocess.<\/p>",
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