Until recent past, Chinese authorities refused to revalue yuan, focusing instead on maintaining economic stability and implementing banking reforms. This article primarily discusses about the impact of yuan revaluation and its subsequent impact on the global oil prices.

On July 21, 2005 a historic episode has been added to the history of world's foreign exchange market. On that day Chinese authorities ended the decade old pegging of Chinese yuan to US dollar in favor of a managed float. Chinese government was facing intense pressure from the US, Japan and some European countries for some time now to revalue its currency due to the deteriorating trade balance of those countries with China, as the yuan was overly under priced against the currencies of those countries.

As a result, on July 21, Beijing announced it will no longer peg its currency renminbi with US dollar, instead it will tie the value of yuan to a basket of currencies. The decision of the Chinese authorities to revalue yuan was not a surprise move, but the big shock for the international foreign exchange market was that it happened well ahead of expectations. For some time in recent past the Chinese authorities were continuously denying the fact that they may revalue yuan, focusing instead on maintaining economic stability and implementing banking reform. So the announcement took everybody by surprise and all the financial markets became volatile.

Treasury Management Magazine, Yuan Revaluation, Global Oil Prices, Banking Reforms, Foreign Exchange Market, International Foreign Exchange, Chinese Products, Global Petroleum Industry, Global Oil Markets, Asian Financial Crisis, Chinese Economy.