The Chinese are certainly prepared to be able to move if they feel they should ... a little while back they replaced their dollar peg with a hidden basket peg (that is, the Singapore model), and that gives them flexibility to slide over to the Euro without requiring any single big dramatic move to unsettle financial markets.

Basically, a hidden basket peg is where you peg your currency to a basket of foreign reserve currencies, and do not announce the composition of the basket, the peg, or changes in either. You can change either the composition of the basket or the peg, and in the noise of the fluctuation of the currencies in the basket against each other, its difficult to work out with any precision where the precise peg stands.

If the Chinese were going to make such a move, they certainly would not tip their hand. So if indications appear, it will be on the European side.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.