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Can hedge funds rely on renminbi’s tie to the dollar?

The hottest debate around the Chinese economy is how long hedge funds can rely on the renminbi being tired to the US dollar, an expert has asserted.

The hottest debate around the Chinese economy is how long hedge funds can rely on the renminbi being tired to the US dollar, an expert has asserted.

Tom Elliott, strategist at JP Morgan Asset Management, has produced research suggesting that the country’s attitude towards the way its currency is valued may be changing.

He said that many Western investors see this as a protectionist policy that is contributing to global trade imbalances and poverty.

Mr Elliott pointed to the fact that Zhou Xiaochuan, governor of the People’s Bank of China, recently suggested that the renminbi’s appreciation in 2008 was in response to the downturn.

He stated: “It nonetheless suggests that China can see some advantage in a currency revaluation.”

Earlier this month, Chinese premier Wen Jiabao stated that the renminbi is not currently undervalued.

He stated his opposition to countries involved in “mutual finger-pointing” to try and get other countries to appreciate their currencies.

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