Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Its not clear that they are shifting their peg - when they adopted the Singapore peg, it was broadly speculated that it was with a very large ratio of dollars in the currency basket, but still its not 100%, and so there will be natural fluctuations of the US$ against the Yuan at any given peg as the US$ fluctuates against the other currencies in the basket.

But since they declare neither the composition nor the peg, and do not declare when they have changed the peg, and then since the peg itself is a trading band, and then different relative composition of the non-US currency would imply different fluctuations of the yuan against the dollar as different currencies in the basket move in different directions without the peg moving at all ...

... its simply possible to move the peg and the composition in small steps frequently enough so that there is not enough data to get a good statistical test for composition and pegged rate, simultaneously.

Indeed, when Singapore originally developed it, that was the whole point - you cannot "hide" a hard peg to a single currency, leading to risks of being swamped by speculative finance if speculators come to believe your peg is unsustainably high ...

... but if people do not know the make-up of the basket you are pegging against, telling a natural shift due to changes in the underlying rates apart from a policy shift in the peg against the basket is quite tricky. Especially when the decision makers are deliberately trying to hide the policy changes in the noise.

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 05:35:12 PM EST
[ Parent ]
BBC NEWS | Business | China to sell yuan bonds abroad

China has announced its first sale of government bonds in yuan outside the mainland.

The government will sell 6bn yuan ($880m; £534m) of bonds in Hong Kong to "improve the international status of the yuan," the finance ministry said.

The sale is a milestone as China opens up its financial markets and promotes its currency as a world benchmark.

Earlier this year, China's central bank called for a new global reserve currency to replace the US dollar.

It's a small trial balloon rather than a declaration of war. But you don't do something like this without considering the implications for the longer term.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Sep 29th, 2009 at 10:33:13 AM EST
[ Parent ]
... convertibility of the yuan from its current halfway house was in the mini-utopia above, and here is another step along that path.

If I came into money, I'd buy these as well as Ozzie dollar bonds and EU denominated sustainable energy project bonds (if there are any for sale).

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 Tue Sep 29th, 2009 at 02:53:41 PM EST
[ Parent ]


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