currency appreciation

On Monday after the announcement that China let the yuan rise to the highest since July 2005 stocks and commodities jumped while US Treasuries fell which eased tension between Beijing and Western economies.

The reports revealed that European stock futures increased by 2.2% and US stock futures were also near highs for the day. The move resulted in higher confidence on the part of investors in global recovery.

Thus, the yuan was increased to as high as 6.8015 against the dollar, or up 0.38%, the highest since it revaluation five years ago.

According to the 21st Century Business Herald China is testing the country's labor-intensive export sectors to see how much yuan appreciation firms can withstand. The Ministry of Commerce and the Ministry of Industry and Information Technology are conjointly performing “stress tests” to use the results as a reference for the government's future yuan policy.

 The research institute of China's Ministry of Commerce published an essay that touched upon the issue of yuan appreciation and its adverse effects on the global economy. The essay notes that increasing the value of the Chinese currency would hurt rather than help world economic recovery.

 On Friday an official Chinese newspaper made a comment on the weakness of the US dollar saying it is "holding back" other countries' economic recovery, forcing them to choose between squeezed exports and inflation risks. The Chinese-language People's Daily said that the dollar creates problems for many nations across the globe.

 Luxembourg Prime Minister Jean-Claude Juncker urged China on Sunday to loosen its currency so as to let it appreciate gradually while the Europe in whole is not counting on immediate effects.

"I can't say that I'm more optimistic than I was before I came here," Juncker, who chairs the 16-nation Eurogroup of euro zone finance ministers, told a news conference in the eastern Chinese city of Nanjing.