China’s prime minister announced on Wednesday that his country will allow market forces to exert more influence on the yuan, a move that could affect their exchange traded funds (ETFs). David Lague of the New York Times reports that while the news isn’t exactly a surprise, it is a strong acknowledgment that China is looking to move away from a rigid currency structure.
Right now, China allows the value of the yuan to move in a tightly controlled range against the dollar, but is getting ready to allow it to continue to appreciate gradually. It’s strengthened by more than 12% since July 2005. Europe and China’s other trading partners will be relieved at the news, because they’ve been complaining that an undervalued yuan gives Chinese exports an unfair advantage.
Now, the playing field should level out some.
China’s ETFs might get a boost if the yuan continues to rise according to market forces:
Here’s a look at how the dollar has performed against the yuan this year:
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