World capital markets up on China's further exchange rate reform

09:21, June 22, 2010      

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Responding to the People's Bank of China's announcement of more flexibility yuan exchange rate, global stock and commodity marketed rallied on Monday.

Stock markets in Asia rose by around 2 percent on June 21, while stock markets in Europe increased around 1 percent. Meanwhile, expectations for more demand from China pushed crude oil prices to close to 79 U.S. dollars.

The international community has reacted positively to the pronounced move by the People's Bank of China to proceed further with its reform of the exchange rate regime.

U.S. President Barack Obama described the move as a "constructive step" while IMF Director-General Dominique Strauss-Kahn rated the move as "a very welcomed development."

The European Union said "he implementation of the decision will help achieve more sustainable growth in the global economy, contribute to reduce external imbalances and strengthen the stability of the international monetary and financial system" in a statement.

The announcement yesterday may help restore investor confidence shaken by the European debt crisis, said Jim O'Neill, chief global economist for Goldman Sachs Group Inc.

Analysts pointed out that the significance of China's further reform of its exchange rate regime is not only about this action alone, but is also a signal for stronger confidence in economic rebound.

Stimulated by the action of China's central bank, Japan's Nikkei 225 jumped 2.4%. Hong Kong's Hang Seng Index rallied 3.1 percent, while markets in Taipei, Singapore, Australia and S Korea also increased by as much as 1.8 percent.

The German DAX was higher by 1.4 percent midday. Britain's FTSE 100 was also up by 1 percent. U.S. S&P 500 index futures were trading higher by just under 1 percent Monday.

Crude oil prices rose to the highest level in six weeks after China announced it will increase flexibility in its currency. Oil was up over 1.5 percent Monday morning and hovering around 78.50 U.S. dollars per barrel.

By People's Daily Online


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