China's currency, now valued at 8.11 yuan to the dollar, trades within a 0.3% band in a managed float against a basket of currencies reflecting those of its top trading partners: the US dollar, the Euro, the Japanese yen and the South Korean won. China's central bank did not disclose the weighting of each currency, but said the Singapore dollar, pound sterling, the Malaysian ringgit, the Russian ruble, the Australian dollar, the Thai baht and the Canadian dollar also figured in the basket calculation.
China's action failed to completely defuse the protectionist mood looming in the US Congress, some of whose members are looking for yuan appreciation of up to 40%. US senators Charles Schumer and Lindsey Graham said they would push for a vote on their bill to impose a 27.5% tariff on Chinese imports unless Beijing further adjusts the yuan by October 1. For its part, China's central bank said the revaluation "does not in the least imply an initial move which warrants further actions in the future."
Despite those words, China took additional steps toward a liberalized currency system. Weeks after the revaluation announcement, regulators allowed more than 130 domestic and foreign banks to trade contracts protecting them against swings in the yuan. The central bank also relaxed limits on the amount of foreign currency that companies can hold and increased the amount of yuan Chinese nationals traveling abroad can sell.
The impact of China's currency revaluation remains to be seen, but economists and other experts agree that further shifts in the exchange rate can be expected, possibly by the end of the year.