* Justhopin Post: Currency Chatter (VND Info… found on J4D)

As China is on the verge of revaluing its currency do you see other Asian currencies,specifically Vietnam, following in a similar pattern as a result of pressure of trade, etc.?

I thought this was a fair analysis of the current situation in Asia as well as the Asian currency markets.

His response:

China remains under pressure from the US and from some of its own advisers to let the yuan rise moderately — for the latter as a way of raising real incomes of workers and dampening inflation pressures. However the extent of any move is now likely to be later and less than was being expected just a few weeks ago when Geithner’s Beijing visit seemed to indicate that the Chinese would move if the US talked more nicely to them.

Now several events have altered the picture. Firstly the sharp decline in the euro and (to a lesser degree Sterling) and most recently the easing of the previously very strong Canadian and Australian dollars, and of the Korean won. On a trade weighted basis the yuan has already appreciated significantly.

Secondly worker agitation in southern China for higher wages seems to have been tacitly accepted by Beijing and indicates that offficial policy now is to push wages higher as a means of improving consumer demand and reducing reliance on exports and investment by the state. In turn this is increasing pressure from exporting companies not to see their margins further hurt by revaluation.

Thirdly,(and this is only a minor factor) the Korean situation has caused some new strains in China’s ties with the US and allies.

The Vietnamese dong has been following its own downward path against the dollar both because of local inflation and the trade deficit. However it may stabilise against the dollar if the yuan begins to move up.

As for other Asian currencies, they have mostly already appreciated significantly against the dollar over the past year and probably will stay where they are until China moves, in which case some further appreciation is probable. Interest rates rises to control inflation may even result in further gain before China moves. But offsetting the reality of their strong trade positions and easy money policies, the likes of Korea, Thailand, malaysia and Taiwan may be negatively effected by rising fears of a double dip recession in both the EU and US which would damage their exports. In which case hot money may stay away even if interest rates are attractive.