Re-valuing China's currency seems like a no-brainer. But is it? Here are some of the potential consequences: http://www.economist.com/agenda/displayStory.cfm?story_id=3982328
The idea is brought up in this article, as well as many others, that the yuan peg has forced the euro to absorb the brunt of the devalued dollar. I've seen this stated many times but never explained. How could this be and why is it accepted as fact? Any ideas?
The forex markets are currenlt basing their trades on the perceived growth rates of the various regions. They have bid up the dollar based on US GDP growth being better than Asia's or Europes. They have bid up the Yen in sympathy with the Perceived increase in value of the Yuan. Finally, Europe's economy is doing poorly compared to the US.