Note that it was French President Sarkozy who went to China to protest the currency peg, not German Chancellor Angela Merkel.

China has essentially pegged its currency to the dollar, while most other currencies fluctuate more or less freely.

The currency peg has also helped make the euro into an important reserve currency, rivaling the dollar.

Some have suggested that the trade imbalance is related to China s currency peg to the US dollar.

China s decision to end its decade old policy of pegging the Yuan to the dollar has been greeted in Latin America with enthusiasm and optimism.

And the dollar could still remain the preferred reserve currency, provided it is prudently managed.

Whereas the peg to the dollar was resumed during the global financial crisis, in June China announced a return to flexibility.

The Chinese are not going to change their exchange rate regime, which has strategic as well as economic motivations, just because the Europeans are unhappy with the currency peg.

Rather than harping endlessly on China s currency peg, which is only a small part of the problem, the US has asked for help where it counts on the bottom line.

China s currency peg has also come in handy for Europe in its fight to keep inflation in check, while its monetary policy remains constrained by the sub prime crisis.

Of course, with China pegging the renminbi to the dollar, the Fed would, in effect, be reflating not just the US but also the Chinese economy.

The currency peg has also helped make the euro into an important reserve currency, rivaling the dollar. Investments from all over the world are flowing into Europe as a result.

MUNICH Because China has pegged its undervalued currency, the renminbi, to the dollar, every weakening of the dollar in the wake of America s financial crisis has also meant a weakening of the renminbi vis à vis other world currencies.

But, even with China s efforts to loosen the renminbi dollar linkage, it is arguable whether revaluation could save American jobs or improve the US trade balance.

Back then, pegging the renminbi to the dollar pushed down China s real effective exchange rate, because the dollar was losing value against other currencies, such as the euro, sterling, and yen.

It was predictable that China s currency peg would have this effect. It forced China to accumulate huge amounts of dollars to stabilize its currency and gave the euro an extra boost as the dollar depreciated.

It undertook a small revaluation in 1969 and then let its currency float in May 1971.

Pegged exchange rates clearly have been essential to East Asia s economic takeoff, for they work well with the region s export oriented development model.

China s abrupt decision to raise the value of the renminbi (yuan) by 2.1 and to end its peg to the dollar comes after months of pressure from the US. But the revaluation is likely to be a one time affair and the free floating of the renminbi is probably not real because a stable currency is very much in China s interest.

But, in a world where China links its currency to the dollar at an under valued parity, the dollar s depreciation risks major global economic damage that will further complicate recovery from the current worldwide recession.

BEIJING In June, the Peoples Bank of China (PBC), China s central bank, announced an end to the renminbi s 23 month old peg to the dollar and a return to the pre crisis exchange rate regime adopted in July 2005.

MUNICH Because China has pegged its undervalued currency, the renminbi, to the dollar, every weakening of the dollar in the wake of America s financial crisis has also meant a weakening of the renminbi vis à vis other world currencies. But is China really to blame for the eruption of a global currency war?

Its currency moves have had a decisive influence on exchange rates.

Europeans are wrong to be angry with China because its currency peg to the US dollar has boosted the euro against most currencies on foreign exchange markets. On the contrary, they should view the currency peg as a valuable gift.

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Sami can tie his shoes.

Sami can tie his shoes.

Linking the virtual world to the real

Moreover, the Lebanese pound is pegged to the US dollar.

Today, every country seems to want to depreciate its currency.

The country invented by MacGregor had even its own legal currency.

It makes sense for companies to move to where dollar sales are booming, and for asset managers to put money where GDP growth measured in dollars is fastest.

Yahweh is righteous. He has cut apart the cords of the wicked.

The LORD is righteous he hath cut asunder the cords of the wicked.

China has been criticized in the past for allegedly manipulating its exchange rate, because it did not revalue its currency as much as the US demanded.

Finally, Greece could leave the euro and devalue its currency.

Second, China will have to make its currency convertible.

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And most of you associate that with something!

The kidnappers tied Tom's hands behind his back.

Continuation of the institutional linkage of the secretariat to the United Nations

One key feature of the Bretton Woods system was that countries would tie their exchange rates to the US dollar. While the system was effectively eliminated in 1971, the US dollar s central role in the international monetary system has remained intact a reality that many countries are increasingly unwilling to accept.

The explanation, I believe, lies largely in the August 11 devaluation of the renminbi, after a decade of appreciation. By moving away from the renminbi peg to the US dollar an undoubtedly risky move China demonstrated its willingness to allow market forces to establish the exchange rate in the long term.

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(The yuan should be included as soon as China makes its currency convertible.)