Greenspan warns China on currency peg

[ze_dscherman]

Alan Greenspan, chairman of the US Federal Reserve, on Wednesday warned that the Chinese authorities could not continue to peg their currency without endangering their domestic economy.

The comments, in front of a congressional committee, add to a chorus of concern among policymakers about China's insistence on fixing the renminbi against the dollar. Mr Greenspan suggested that the renminbi would have to be allowed to float, saying the current campaign of intervention to support it was unsustainable.

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Inflows of "hot money" into China have recently forced the central bank to buy an average of $600m (£422m) a day to keep the currency steady against the dollar. This pushed China's foreign exchange reserves above $340bn by the end of June from $316bn at the end of March. The surge is viewed by many as evidence of the undervaluation of the currency.

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To connect the dots, read this (Asia fills her boots: dollar reserves skyrocket): http://www.atimes.com/atimes/Asian_Economy/EG15Dk01.html