Yuan / Ringgit Repeg

BEIJING : China revalued its currency on Thursday for the first time in about a decade, fixing the yuan at 8.11 to the US dollar, up from 8.28, and also scrapping the decades-old peg to the dollar in a favour of basket of currencies. "From today, the renminbi rate against the US dollar will appreciate by 2 percent," said the website of China's central bank, the People's Bank of China, BOC) on Thursday. "One US dollar will exchange for 8.11 yuan." The move comes after months of political pressure on China.

But as soon as China made the move, Malaysia was forced into action and almost immediately, announced that it was moving to a managed float system for the ringgit. Central Bank governor Zeti Akhtar Aziz said this would have a positive effect on the Malaysian economy. Zeti declined to state the new value of the ringgit, which is widely seen as undervalued. Malaysia pegged its currency at 3.8 to the dollar on September 1, 1998, following the Asian financial crisis.

For months, Beijing has resisted calls to revalue its yuan. It stood steadfast against political pressure from the United States where manufacturers argued that their bottomlines had been hurt because the yuan was kept artificially low. US officials say the yuan's fixed exchange rate against the dollar has left the Chinese currency significantly undervalued, lifting Chinese exports, giving them an unfair advantage, and inflating the US trade deficit. However Chinese leaders remained firm in saying that any change would be done at their own time. They voiced concerns that instability in the forex markets would not only hurt China but also its neighbouring countries. But Beijing also realised that it had to reform its currency regime. And it found a model in the Singapore system in which the local currency is allowed to trade against a basket of currencies within a pre-determined range.

Japan has welcomed China's revaluation of its yuan currency as a "first step" to internationalise its economy, Chief Cabinet Secretary Hiroyuki Hosoda, the government spokesman, said Thursday. "This is the first step in the internationalisation of the Chinese economy and the first step in the internationalisation of the yuan," Hosoda told reporters. - CNA /ch

Comments - More excitement for the stock market tomorrow. China Yuan confirmed 2% appreciation but M'sian Ringgit nothing firmed up. Anyway, watch out for China and Malaysia Stocks if you have any. Prepare to sell if the market over-reacts too optimistically :D