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Just stated on CNBC.
I have no way to judge that, but if it comes it is both good and bad.
The good: It's about a third of what has to happen, and as a step function it would apply major cooling to the "Chinese miracle" inflation machine. They need to do that too, which makes the rumor plausible. Coming on a long trading weekend here (Good Friday/Passover closes us this week) and on a weekend anyway (China's favored time to do this sort of thing) it would be appropriate both in terms of timing and event.
The bad: While there would be no direct dollar impact from this action since the Yuan is not convertible and thus not part of the $DXY index the indirect effects would be tremendously disruptive in the short term. This has a high probability of forcing corrective actions by The Fed, perhaps even before the futures market reopens Sunday night. The risk for The Fed and United States is that the dollar winds up gapping down by hundreds of pips, perhaps threatening the all-time low. Violation of the all-time low could result in massive pressing of short bets and a possible immediate fiscal crisis.
So, if China let's the RMB float up 10%:
1.) Things that get made in China and exported to the USA will get 10% more expensive. This will result in 10% higher prices for DVD players and all things chinese (most of the things that Americans buy in a Walmart, and every other store accross the country for that matter)
2.) China will be able to buy 10% more goods (oil, commodities, ect.) So more bullishness in the commodity space?
3.) Will the offset from reduced trade to the US due to higher prices be offset by trade with people in China due to more purchasing power?
Originally posted by mayabong
reply to post by MidnightTide
How do interest rates effect the gold and silver markets? any ideas? I still don't really understand how the interest rate thing works. Don't they raise interest rates to curb inflation? Can anyone explain how raising interest rates curbs inflation.