FinancialEdge: How Will China's Currency Moves Affect The U.S.?

Much of the financial media may still be focused on the accelerating downward spiral of Greece or the anti-Wall Street protests in New York City, but China took a page from Glenn Close's book Wednesday and reminded the markets that it will not be ignored. The real question, though, is whether China's currency combat techniques and prickly sense of sovereignty represent a clear and present danger to U.S. businesses, consumers and investors.

What Happened 

The exchange rate between the U.S. dollar and the Chinese yuan has been a matter of contention between the two governments for quite some time. Put simply, the U.S. accuses China of manipulating the currency exchange rate. Strictly speaking, that is exactly right as it must be for unilaterally fixed exchange rates. In practice, the USD/CNY currency rate trades at a rate higher where it would be in a free-floating market, making China's exports cheaper than they would otherwise be and making imports into China correspondingly more expensive.

Read the full column here:
http://financialedge.investopedia.com/financial-edge/1011/How-Will-Chinas-Currency-Moves-Affect-The-U.S.aspx#axzz1aPf3YKKm