US Markets React to Yuan's Revaluation

US markets reacted strongly on July 21 after China said it would end the decade-old peg to the US dollar and let the yuan fluctuate versus a basket of currencies.

    In early New York trading, the yen and euro rose sharply against US currency. The dollar bought 110.75 yen at 8:45 a.m., down from 112.91 late Wednesday, and the euro rose to 1.2193 dollars from 1.2138 late Wednesday.

    The China shift "makes the yen more attractive to many people," said an analyst at Goldman Sach Group Incorporated. He said he expected the yen to advance to 105 per dollar within the next two months, and reach 100 within a year.

    US Treasury notes dropped as many expected that China would buy fewer US Treasuries. "There could be upward pressure on Treasury yields," said a senior economist at New York-based Barclays Capital Incorporated.

    China is the second-largest foreign holder of US Treasuries, with more than US$243 billion at the end of May. (Xinhuanet, www.chinaview.cn 2005-07-21 22:37:31)