Will We See Yuan Appreciation?

It appears that Chinese inflation is on the rise again, indicating that the country is seeing strong economic growth. Again. China's leaders are wary of seeing such rapid growth, and are expected to clamp down, possibly even revaluing the yuan against the U.S. dollar.

However, the moves the Chinese are likely to make probably won't be that large. China recognizes its place as the current leader of global economic recovery, and is aware that limiting its growth too much will also limit the speed of global economic recovery.

GFT's Boris Schlossberg speculates in FX360 on what could be next for China:

The cost of such a shift however, has been a marked rise in inflation and many analysts are now fearful that the Chinese authorities will begin to clamp down on monetary growth by either raising rates or revaluing the yuan. However we believe that any tightening moves will be gradual at best and will be undertaken only after the Chinese are convinced that US economy is beginning to fully participate in the global recovery.

China may not have too long to wait for the U.S. to get a little more active in the global economic growth scene; there is speculation that things are improving enough that the U.S. will raise interest rates in the second half of 2010.