Chinese Yuan

The economic headline this morning is that China has agreed to allow the yuan to appreciate.

The announcement is being credited with about a 1% higher opening for the stock market and numerous pundits are claiming this will make a significant difference.

But this has happened before and it had little impact. From 2004 to 2007 the yuan appreciated some 20%. But the net impact was about a 1% rise in the price index for US imports from China and essentially no impact on the US trade deficit with China.So why should anyone expect a different reaction this time?

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