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The difference is in terms of what types of assets they are buying as they maintain the US$ rate - buying Euro-denominated assets to depreciate the yuan against the Euro and maintain roughly steady exchange rate against the dollar implies a different foreign exchange reserve holding than directly pegging against the dollar.

But it is not something that can be pulled off in crisis conditions, since if the peg starts moving in too large increments, it becomes impossible to mask the composition of the currency basket. The hidden basket involves both the peg and the composition hiding behind the noise of exchange rate movements, with it unclear what movements are policy driven and what movements are the natural result of the composition of the basket. That's why the Singapore peg normally involves small incremental moves of the peg.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Sep 28th, 2009 at 03:30:32 PM EST
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