China May Re-Evaluate Yuan 5%

This might be a tad bit of good news for U.S. manufacturing. Bloomberg is reporting China may allow Yuan to increase 5% in a one time move.

The Chinese government may allow the yuan to have “a bigger one-off move than people talk about, at least 5 percent, maybe more,” O’Neill said in an interview today at the London School of Economics. “They may also consider having a wide band to let it move more frequently on the daily basis to stop speculative players.”

China’s economy rebounded stronger than anticipated in the fourth quarter, and the inflation rate accelerated to a 13-month high of 1.9 percent in December, igniting speculation the government will abandon the yuan peg to avoid the economy from overheating. China has kept a lid on its currency since July 2008 after it strengthened 21 percent against the dollar over the previous three years.

This prediction if from Goldman Sachs. When will it happen?

Goldman Sachs chief economist Jim O’Neill says any day but as a surprise and the reason is to stop inflation and cool down their overheated economy.

Of course the U.S. economy sure isn't overheated.

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