World Markets Rise as China Allows Yuan Gain

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Stock markets around the world were rising on news that China would no longer peg its currency against the value of the U.S. dollar.

By late Monday, the yuan was trading at about 6.8012 to the U.S. dollar in the spot market, strengthening from 6.8272 on Friday.

China's economy is so robust, the yuan should be worth much more. By tying it to the flagging dollar and keeping it undervalued, that's made it much harder for Chinese consumers to afford imports. And it has kept China's goods artificially cheap.

The appreciation of the yuan should also reduce the threat of inflation, which means the government may not have to raise interest rates soon.

"Market players saw the announcement as a sign that Chinese authorities are confident in China's economic growth," said Kazuhiro Takahashi, equity strategist at Daiwa SMBC Securities Co. Ltd.

There has been a vast trade imbalance with China and the world. The value of the People's Republic's currency has made it extremely difficult for other nations to sell to China's more than 1.3 billion people, which is the largest market in the world.

For the past two years, Beijing has kept the yuan trading in a much narrower band around 6.83 to $1.

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