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Treasury secretary says he can''t imagine how IMF would ever sell gold
By Jeremy Gaunt
Reuters
Tuesday, April 19, 2005
http://www.reuters.com/financeNewsArticle.jhtml?
type=bondsNews&storyID=8226139
LONDON -- U.S. bonds and the dollar would the main losers from a
revaluation of the Chinese currency being sought by leading
industrial nations, a poll of investors showed on Tuesday.
In a regular monthly investor survey, Merrill Lynch asked fund
managers across the world what short-term impact a 10 percent
revaluation of the yuan against the dollar would have on various
assets.
Although there were a large number of "don't knows," a negative
impact was seen on U.S. fixed income and the greenback.
Some 51 percent of respondents said U.S. bonds would suffer, compared
with just 13 percent expecting a positive impact. David Bowers,
Merrill Lynch's chief investment strategist, said one reason was that
a stronger yuan would export inflation to the United States, making
U.S. debt less attractive.
Similarly, China and other Asian countries have been keeping their
currencies pegged to the dollar by buying Treasury bonds. This would
presumably diminish if the Chinese currency were to rise.
Forty-one percent of those polled by Merrill said a 10 percent
revaluation would be negative for the trade-weighted dollar.
Finance ministers from the Group of Seven industrial nations repeated
calls at the weekend for foreign exchange rates to reflect economic
fundamentals, seen as aiming at China's policy of pegging its yuan
currency to the dollar.
The current peg is viewed by U.S. manufacturers as giving China an
unfair trade advantage. China has said it aims to move gradually to a
market-based exchange rate.
The biggest beneficiaries of a revaluation were seen as U.S. equities
and the Japanese yen.
Some 39 percent of respondents saw a positive impact for U.S. stocks
compared with 23 percent who saw a negative impact.
An similar breakdown -- 38 percent to 21 percent -- said the
revaluation would be positive for the yen.
The biggest question mark, however, hung over the impact of a
stronger yuan on commodities.
Thirty-four percent of respondents said commodities would benefit
while 34 said they would suffer. Fourteen percent said there would be
no impact and 18 percent did not know.
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