News Release From China's Central Bank
With a view to establish and improve the socialist market economic system
in China, enable the market to fully play its role in resource allocation as
well as to put in place and further strengthen the managed floating exchange
rate regime based on market supply and demand, the People's Bank of China, with
authorization of the State Council, is hereby making the following announcements
regarding reforming the RMB exchange rate regime:
1. Starting from July 21,
2005, China will reform the exchange rate regime by moving into a managed
floating exchange rate regime based on market supply and demand with reference
to a basket of currencies. RMB will no longer be pegged to the US dollar and the
RMB exchange rate regime will be improved with greater flexibility.
People's Bank of China will announce the closing price of a foreign currency
such as the US dollar traded against the RMB in the inter-bank foreign exchange
market after the closing of the market on each working day, and will make it the
central parity for the trading against the RMB on the following working day.
3. The exchange rate of the US dollar against the RMB will be adjusted to
8.11 yuan per US dollar at the time of 19:00 hours of July 21, 2005. The foreign
exchange designated banks may since adjust quotations of foreign currencies to
4. The daily trading price of the US dollar against the RMB
in the inter-bank foreign exchange market will continue to be allowed to float
within a band of ��0.3 percent around the central parity published by the
People's Bank of China, while the trading prices of the non-US dollar currencies
against the RMB will be allowed to move within a certain band announced by the
People's Bank of China.
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. The RMB exchange rate will be more
flexible based on market condition with reference to a basket of currencies. The
People's Bank of China is responsible for maintaining the RMB exchange rate
basically stable at an adaptive and equilibrium level, so as to promote the
basic equilibrium of the balance of payments and safeguard macroeconomic and
I hope everybody bought FXI and shorted or had puts on Wal-Mart.
And I also hope you didn't have lots of long term bonds.
Ishares Xinhua index ETF
- All those folks who said "Warren Buffett was wrong!" have egg on their faces now.
- Note to self: the next time there's a pending "something" going to happen in financial markets, and nothing happens for a few days, increase your position more favorably towards that "something."
Not that I'm crying over any lost money. Today will have been a good day.