Currency
Brazil's Meirelles favors 'faster' end to yuan peg
Brazilian central bank President Henrique Meirelles said he favors a "faster" revaluation of the Chinese yuan after the country committed to ending the currency’s fixed exchange-rate peg to the dollar.
"We would welcome a faster move rather than a slower move," Meirelles said today in an interview in Brussels. "But again that's not a prediction or a forecast. We are not here determining what should be done."
Meirelles, 64, said it was up to Chinese authorities to determine how fast they will end the yuan peg, saying "they have a full picture of their economy and then they can have their own assessment, balancing all the factors."
He said ending of the yuan peg would help correct global imbalances that are "one of the most important issues to be resolved in the world economy."
China this month committed to ending its currency’s fixed peg to the dollar. The yuan had been held at 6.83 per dollar since July 2008 after a 21 percent gain the three prior years.
Twelve-month non-deliverable yuan forwards fell 0.2 percent to 6.6910 per dollar as of 7:20 a.m. New York time, according to data compiled by Bloomberg. The contracts reflect bets the currency will strengthen 1.6 percent from the spot rate of 6.7977.
China indicated on June 19 that it was scrapping the yuan's two-year-old peg to the greenback and reiterated the aim June 26 in Toronto during a two-day meeting of leaders from the Group of 20 nations. While the G-20 did not mention the yuan in its closing statement, the group called for "greater exchange-rate flexibility in some emerging markets."
The yuan has strengthened 0.4 percent since China ended the peg and U.S. President Barack Obama two days ago said further gains are anticipated in coming months.
A yuan revaluation won't happen quickly or fix all of the global economy's imbalances, International Monetary Fund Managing Director Dominique Strauss-Kahn said yesterday.
China surpassed the U.S. as Brazil’s biggest trading partner last year, as exports of iron-ore and soy increased during the global financial crisis while sales of manufacturing goods to the U.S. declined.
A stronger yuan would boost manufacturing exports for several countries, Meirelles said in the interview in April on the eve of Brazil's hosting of a summit of the leaders of Russia, India and China.
Speaking today on the sidelines of a Friends of Europe event in Brussels, Meirelles said Brazil’s financial system "has shown a very good resilience" to the global financial crisis.
"The Brazilian financial system made no contribution for the present economic crisis," he said.
Brazil's economy expanded 9 percent in the first quarter from a year ago, its fastest pace in two decades, and is forecast to grow 7.13 percent this year, according to a central bank survey of about 100 economists published yesterday.
(Published by Bloomberg – June 29, 2010)