China, Malaysia scrap currency pegs for managed float system
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BEIJING : China revalued its currency and scrapped the yuan's decade-old peg to the US dollar in favour of managed float against a basket of currencies, caving in to intense pressure from trading partners led by the United States.
The currency was fixed at 8.11 yuan to the US dollar compared to the old rate of 8.2765 yuan, effectively a two percent revaluation.
The move was effective from 1100 GMT.
The US dollar dropped sharply against several Asian currencies following the announcement, sinking to 110.38 yen - its lowest level since June 30 - from 112.50 yen before the move.
"From today, the renminbi rate against the US dollar will appreciate by two percent," said the website of China's central bank, the People's Bank of China, (PBOC). "One US dollar will exchange for 8.11 yuan."
Almost simultaneously, Malaysia scrapped the ringgit currency's peg to the US dollar and said it would move to a managed float.
The PBOC said it was scrapping the yuan peg to the US dollar and setting the Chinese unit against a trade-weighted basket of currencies.
It did not reveal what these currencies were.
Previously, the foreign exchange trade centre had suggested such a basket could include some or all of the following - the Hong Kong dollar, the yen, the pound, the Swiss franc, the Australian dollar, Canadian dollar and the euro.
The daily trading price of the yuan versus the dollar will be allowed to move within a band of 0.3 percent, while the non-US dollar currencies will be allowed to move in yet-to-be announced bands, the central bank said.
China's yuan, or renminbi, has been pegged to the US dollar at 8.28 since 1997.
The last time the government changed its currency regime was in 1994 when Beijing devalued the yuan by over 50 percent, from around 5.70 to 8.30, from where it moved up to 8.28 by 1997 where the authorities held it ever since.
China's trade partners, especially the United States, have stepped up pressure for a revaluation in recent months, arguing an undervalued yuan gave Beijing an unfair trade advantage, helping inflate the US trade deficit.
US manufacturers contend that China's fixed currency system has undervalued the yuan by as much as 40 percent, making Chinese products cheaper in the domestic market and American goods more expensive in China.
US Treasury Secretary John Snow had warned China that if it did not move on its currency by mid-October, the White House was prepared to name China as a currency manipulator, a move that might have led to trade retaliation.
Congress had threatened to pass a bill proposed by New York Democratic Senator Charles Schumer to slap a 27 percent punitive tariff on imports of textiles from China if it failed to act.
The PBOC said Thursday the move is aimed at solving a host of problems that the pegged system against the US dollar had been causing on the back of China's rapid economic expansion.
"The move is aimed at easing trade imbalances, boosting domestic demand and increasing Chinese companies' competitiveness," the PBOC said.
"It will also help to increase the independence of monetary policy, improve the effectiveness of financial controls, help maintain the basic balance of imports and exports to improve trade conditions, stabilize prices and cut corporate costs."
It indicated further changes could be made "when necessary according to market developments as well as the economic and financial situation."
Analysts said the revaluation move was less than they had expected and was more of a symbolic gesture, with little impact on trade.
"It's a very small move. China is not in the position to make any big moves," said Andy Xie, China economist at Morgan Stanley in Hong Kong.
The revaluation will have "almost zero" impact on trade and will not change prices for American consumers although it could silence critics for now by showing China was willing to move in the right direction, Xie said.
"The Chinese currency cannot move too much too soon because it's still a relatively undeveloped country...The government is making a gesture and hope the American politicians can understand this.
"When exporters accept the changes as natural and become more profitable, maybe the currency can move more in the future."
Other economists said they expect another revaluation by year end while Japan immediately welcomed China's move as a "first step" to internationalize its economy. - AFP /ch -
No big revaluation on ringgit leh,
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i wonder how the ringgit would be.. Rm3 to Us1?
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More likely, RM to go up...Originally posted by alexkusu:i wonder how the ringgit would be.. Rm3 to Us1?
Means, SGD - MYR exchange, might become just to RM2.08 or sort -
hmm..better start moving some money around..
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It means now, it cost more to buy things and pump petrol in JB...
Anyway, with this, products of goods are likely to go up, as they have decided on recently too...
Items price to go up
Ping Pong biscuits
Khong Guan biscuits
Nestle products (Further)
Drinks -
Does that mean sing $ change to msia ringgit getting lesser ? Hmmm... msia ppl work in spore will face a tighter squeeze back in msia? Maybe time to change more money when go inside.
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Yes... But, for them is still balanced as imports becomes cheaper to Malaysia... SGD has also rised aft the announcementOriginally posted by sohguanh:Does that mean sing $ change to msia ringgit getting lesser ? Hmmm... msia ppl work in spore will face a tighter squeeze back in msia? Maybe time to change more money when go inside. -
then it be meaningless shopping at JB.......
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This was brewing for a long time. Finally, something is done. But overall, it's better to switch the peg to Euro.
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RM now stands @ 1 USD to RM3.78
SGD is 1 USD to S$1.65 -
Hey... Wait a sec...
Yesterday when RM was still @ 3.80...
SGD was @ 1.69...
Means 1 SGD to RM is @ 2.248
Now is RM is 3.78, SGD is 1.65
So 1 SGD to RM is 2.29 -
For Exchange rates, always look at the selling ratio, better guage for shoppers..
1.65 USD for SGD is misleading.
+ as of today
USD to SGD
1 = 1.673
USD to MYR
1 = 3.77
SGD to MYR
1 = 2.25
if got updates i tell you all lorh. -
Fewer Singaporeans will go JB and shop in the short-term....
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thats means its still a 50% discount if u shop there? and the currency rate for SGD to MYR is no diff from old one watOriginally posted by sbst275:Hey... Wait a sec...
Yesterday when RM was still @ 3.80...
SGD was @ 1.69...
Means 1 SGD to RM is @ 2.248
Now is RM is 3.78, SGD is 1.65
So 1 SGD to RM is 2.29 -
meaning no more $1 items.....
good for most... we will see what GOV going to do now.... more things going up but for sure not the PAY.... -
We shall wait and see...Originally posted by ceecookie:thats means its still a 50% discount if u shop there? and the currency rate for SGD to MYR is no diff from old one wat
Because it is expected that currencies like the SGD might end up rise higher -
For now, not much changes
Expect more, next week... But likely SGD might also rise at the same time -
expect more next week as in?! singapore dollars chg to MYR ringgit will lesser ar?
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Like tat Singapore government more happy cos singaporean will spent more money in singapore instead of goin to malaysia since things is same price now...
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More changes are likely to take place next week...Originally posted by notorious8706:expect more next week as in?! singapore dollars chg to MYR ringgit will lesser ar?
SGD may end up rise together -
For people like me who earns in USD, spends in RMB and have mortgage and credit cards in SGD to pay off...this is bad news! -
Cos both CN and MY are both huge trading partners of SG.Originally posted by sbst275:For now, not much changes
Expect more, next week... But likely SGD might also rise at the same time
an appreciation of their currency will also lead to an appreciation of the SGD.. tho the SGD will probably not strengthen as much..
Anyway, MAS announced that it will not make any changes for now..
haha.. suay.. worst hit..Originally posted by StMichael: For people like me who earns in USD, spends in RMB and have mortgage and credit cards in SGD to pay off...this is bad news!
meaning you're working in an American coy in China? and family's in SG? -
can some1 make it clear how the unpeg of RM to US$ will affect Singapore / S$? i thought it only means malaysian importers importing goods from US will cost more, butthings made in malaysia, exported to singapore will more or less remains the same??