BIG WAVE
04-03-2006, 07:18 PM
The European Union will this week urge China to take its time moving towards a more flexible exchange rate system, rebuffing US calls for Beijing to act quickly to boost its currency.
European policymakers fear a sharp realignment of the renminbi could cause exchange rate volatility, leading to the dollar weakening further against the euro and other EU currencies.
The European Commission, the EU executive, has produced a paper assessing the effects of renminbi revaluation, which says: “China should introduce greater exchange rate flexibility in a gradual manner.”
The paper warns that an abrupt de-pegging of the renminbi from the dollar could cause a sudden reversal of capital flows into the US, which might trigger additional downward movement of the dollar against the euro. Such a move would put up the price of European exports to the US, putting at risk one of the drivers of the EU’s economic recovery.
http://news.ft.com/cms/s/5778d32e-c334-11da-a381-0000779e2340.html
European policymakers fear a sharp realignment of the renminbi could cause exchange rate volatility, leading to the dollar weakening further against the euro and other EU currencies.
The European Commission, the EU executive, has produced a paper assessing the effects of renminbi revaluation, which says: “China should introduce greater exchange rate flexibility in a gradual manner.”
The paper warns that an abrupt de-pegging of the renminbi from the dollar could cause a sudden reversal of capital flows into the US, which might trigger additional downward movement of the dollar against the euro. Such a move would put up the price of European exports to the US, putting at risk one of the drivers of the EU’s economic recovery.
http://news.ft.com/cms/s/5778d32e-c334-11da-a381-0000779e2340.html