You Yuan Our Oil Company?

From the New York Times:
July 22, 2005
China's Opaque Currency Policy

China has abandoned one of the world's clearest currency policies, a tightly managed peg of the yuan to the dollar that had endured since 1997. China has chosen instead to adopt one of the world's most opaque currency policies, with a secret mechanism to reset the yuan's value each night.

Seeing how this fits into American Policy so well....

From the New York Times:

WASHINGTON, July 21 - The Bush administration welcomed China's move toward a more flexible currency on Thursday, but the cautious shift may not be enough to cool the anti-China sentiments boiling up in Congress.
Treasury Secretary John W. Snow called it "the start of an awfully important process" that might resolve one of the biggest economic disputes between the United States and China.
"It is very positive," Mr. Snow told reporters on Thursday morning. "I am particularly struck by the commitment of the Chinese government to get their currency into alignment with market forces."
But the ambiguity of the Chinese announcement, in which it said it would uncouple the value of the yuan and the dollar, made it impossible for administration officials to say whether it amounted to a real change or a token gesture.

It makes it hard to believe that it is not connected to this:

From Reuters U.S. senator vows to try to stop China-Unocal deal

Fri Jul 15, 2005 2:02 PM ET By Richard Cowan

WASHINGTON (Reuters) - A Democratic senator said on Friday he would try to get the Senate to pass legislation blocking the sale of Unocal to Chinese oil company CNOOC as it was against U.S. national interests.
The U.S. House of Representatives already has approved such legislation.
Sen. Byron Dorgan of North Dakota said he was considering attaching his proposal to a foreign operations spending bill being debated by the Senate on Friday and next week or to another bill.
"Our strategic and economic national interest is not served by allowing this to happen," Dorgan said of the attempt by CNOOC Ltd to acquire Unocal Corp

The Unocal deal has support from the White House but a recent House vote was a landslide for the opposition. Much of that support is nativist but the currency issue is linked to how much of our debt (in the form of US securities) is owned by China.

From Bloomberg:
U.S. Treasuries Fall on Speculation China to Reduce Purchases

July 21 (Bloomberg) -- U.S. Treasury notes dropped, pushing the 10-year yield to the highest since May, after China's revaluation of its currency boosted speculation that the country will reduce its purchases of U.S. government debt.

At this point there is little reason to believe that this will affect retail (ie Wal-Mart type) stores as the 2% increase it the yuan's value is small. However, China's double secret probation method of valuing their currency may help make the yuan solid enough for China to purchase more oil and energy products.