The US political pressure on China will heat up in the coming weeks. The pressure will likely culminate in May with the US Treasury formally citing China as a manipulator in the currency market. Anticipation of further appreciation of China’s renminbi is likely to help underpin other currencies in the region and help draw investment into the regional equity markets.
Ironically, but not coincidentally, the heightened pressure that will be brought to bear on China will take place as the renminbi’s appreciation has accelerated. In the first couple months of after the revaluation and shift to a basket approach, the yuan hardly moved against the dollar. In November 05 through January 06, the dollar fell about 0.1 renminbi a month. The pace doubled in February and quickened further in March with roughly a 0.3 renminbi move since the middle of the month.