Friday, July 22, 2005

China's currency drops peg

It happened yesterday, in the middle of summer, and caught most by surprise. China had said so many times they wouldn't change the peg, like a matter national pride. Now it will only be allowed to move 0.3% per day, but this is the first step with which China's currency will slowly rise against the dollar.

Don't expect tea prices to rise all of a sudden, but definitely the trend points to higher prices in the long term as China's economic strength unfolds like oolong in a gaibei. I was not the only one to have predicted it, but I am glad I said it before in this blog.

3 comments:

Steph said...

This is a very interesting thing, indeed! I appreciate your insight and reaction. Thank you for sharing.

Cindy W. said...

I saw this in the headlines yesterday and wondered how it would affect tea prices. How tied to China's currency is Taiwan?

Stephane said...

Tea prices will increase as the currency rises (but, fortunately, at a slower pace). An alternative for tea businesses will be to turn to cheaper, lower quality teas.

Taiwan didn't peg its currency to the USD, but it is tightly watched by the central bank and has somewhat of a link with the USD. As the RMB rises, the New Taiwan Dollar will rise also. But it will be gradual.