Raising rates is generally good for a currency, and in the case of China a rate hike there is actually good for the US Dollar due to that implied peg. Of course there is the fear that a rise in rates could slow growth, but the trends in China are still up. The Peoples Bank of China raised rates.
China’s 1-year lending rate rose by 25 basis points and that rate now sits at 5.56%. The 1-year benchmark deposit rate is now 2.50%.
This is one of those instances that would actually be better the Yuan if the situation was contained only in China. It is that peg, and China’s rate hike may be what the doctor ordered for the US Dollar…. at least today.
The dollar is at 81.52 Yen per dollar and $1.3887 against the Euro.
JON C. OGG
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