Friday, August 17, 2012

Yuan weakness may preclude more easing

Here's a shift, the Yuan might soon be OVERvalued. According to this article, the market is pricing it in. China’s softening yuan could block rate cuts
Recent data showing that China is experiencing capital outflows as its economy slows could mean an important shift is taking place, he said, noting that the yuan’s long upward march against the dollar appears to have ended earlier this year.
China is already facing a battle to attract new investment.

Data released Thursday showed foreign direct investment of $7.6 billion in July, a drop of 8.7% from a year earlier.
“It now seems that the effort was also aimed at stopping investors from pulling money out of China, suggesting that the government is more concerned than it is letting on. Whether liberalization continues or capital controls reappear amid fears of a financial crisis is an open question,” said Chan.

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