If China were to raise the value of the yuan this year , the hike would probably be in the range of 5% to 10% , a far cry from the 25% the US senate is calling for , and imo such a hike 5 to 10% was highly probable before the senate started applying additional pressure .

But in the event such a hike was to happen nonotheless it would have a world wide impact on inflation and mostly in the US considering the wide trade imbalance , now how would America react to that when it happens ?

So far inflation is not a worry but when the time comes to raise interest rates , if the economy is not moving in the right direction as strongly as hoped for a rise in interest rates coupled with inflation might slow down down the economy even further , will the senate then ask China to reduce the value of it's currency because of the negative impacts on the US company established in China seeing their growth and profits being reduced ?

Whatever happens with the yuan , we can bet the action of the US senate will not help in the decision China will take . China has it's own currency policy and does not want to look as an american puppet acting under pressure from abroad . Furthermore China's stake in the US currency and economy is now so huge it can now turn the table on america and impact the US economy with decisions of it's own .

The US talk of reevaluating the yuan is a doublehedge sword that could have a negative impact on world growth in the future , let's hope decision makers will act more wisely in behind doors negociations then they do in public , the implications could greatly impact the average people around the world for a long time to come .

Tec