China Money: Strong Yuan Era May Draw To Close

From Reuters:

Sometime around the end of this year, China’s financial markets may undergo a big shift: the yuan may stop rising.

Since its peg to the U.S. dollar was scrapped in July 2005, appreciation of the yuan — which remains tightly controlled by the central bank through trading rules and indirect intervention — has been something that investors could count on.

The Chinese currency has risen against the dollar in every quarter since then, and for much of that time it has gained against a basket of currencies weighted by China’s foreign trade.

But a slowing Chinese economy and a desire to reduce destabilising flows of speculative money into China may mean the days of continuous yuan strength are drawing to a close.