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China succumbs to pressure and revalues currency
Beijing: In its biggest monetary shift in more than a decade, China yesterday revalued the renminbi (RMB) and dropped the currency's peg to the dollar.

China's central bank announced that the RMB's value would now be linked to a basket of currencies, which immediately led to a 2.1% appreciation against the dollar.

Coming two months before China's president, Hu Jintao, is scheduled to visit Washington, the adjustment appears to be aimed at heading off US alarm at the bilateral trade deficit, which reached a record $162bn last year.

Unions in the US have called the currency peg an unfair competitive advantage for Chinese exporters, who are taking business and jobs away from local firms. American senators have proposed a number of bills aimed at imposing punitive tariffs if China does not adjust the RMB.

Earlier the Chinese government was able to fend off such attacks by saying that its economy was too fragile to cope with an adjustment that would hurt jobs. But, this argument is wearing thin with the announcement this week that economic growth accelerated to 9.5% in the first six months of this year.

In the short term, the small scale of the revaluation, which took the dollar exchange rate down from 8.28 RMB to 8.11 RMB, will make little difference to global trade imbalances. But analysts said it was a breakthrough that would lead to a gradual appreciation of the Chinese currency in the future.

"The People's Bank of China will make adjustment of the RMB exchange-rate band when necessary, according to market development as well as the economic and financial situation," said a website statement. "The RMB exchange rate will be more flexible, based on market condition with reference to a basket of currencies."

Chinese businessmen believe that the main benefactors are likely to be low-cost manufacturing competitors in Vietnam, India and Indonesia rather than US or European companies.
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Oil prices rise: China's currency revaluation may boost demand
New York: Crude oil rose in New York after China revalued the renminbi, making dollar-denominated commodities cheaper to import and raising speculation that demand from the world's second-largest consumer of oil will rise.

Oil for September delivery has fallen 2.4 percent since a U.S. government report showed storms and hurricanes lowered the nation's oil stockpiles less than expected. China's decision to loosen its fixed-exchange rate against the dollar may have helped stem the price decline, traders and analysts said.

Crude oil for September delivery rose as much as 33 cents, or 0.6 per cent, to $57.46 in electronic after-hours trading on the New York Mercantile Exchange. It traded at $57.46 a barrel at 8:19 Singapore time. Yesterday, the contract fell 89 cents, or 1.5 per cent, to $57.13, having earlier traded at a five-week low of $56.50.

China's crude oil imports rose 3.9 per cent to 63.4 million metric tons in the first half of the year, the Beijing-based customs bureau said July 11. Demand growth slowed to a tenth of the pace in 2004 as refiners bought less oil because of higher prices.
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