China Says It Will No Longer Peg Its Currency to the U.S. Dollar - New York Times

China Says It Will No Longer Peg Its Currency to the U.S. Dollar - New York Times: "China said Thursday it will no longer peg its currency to the U.S. dollar but instead let it float in a tight band against a basket of foreign currencies"


From the BBC:

"In effect, this strengthens the yuan by 2.1%, to 8.11 to the dollar.

More importantly, this is seen as the first step in a complete liberalisation of the Chinese exchange rate, perhaps leading to a free float."

While I am sure there will be many who feel it is not enough, this is definitely a step in the right direction. Pegged (or fixed) currency regimes are rarely a good idea in that they create artificial advantages when the currency is undervalued and an unwarranted sense of security that can lead to economic instability (see Peso crisis and Asian Crisis) when the currency is overvalued.