In the longer term, the yuan needs to keep rising against a basket of currencies.
For this reason, we believe that the peg to a basket of currencies will remain in place.
For 13 years, the baht was firmly pegged to a basket of currencies dominated by the greenback.
Japanese Finance Minister Miyazawa Kiichi proposed that Asian currencies be pegged to a basket of currencies, including the euro.
On June 19, China de-pegged the renminbi from the U.S. dollar, pegging it instead to a basket of currencies.
The currency now floats to a limited extent against a basket of currencies.
The investment, which also included a basket of currencies, worked on the thesis that the stocks would rise in value.
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The U.S. dollar index, which measures the exchange value of the greenback versus a basket of currencies, tumbled 0.624% to 74.068.
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They hope that China will eventually allow the yuan to crawl upwards, either against the dollar or a basket of currencies.
The Wall Street Journal Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at about 73.985 from about 74.021.
The warning has put pressure on the pound, which two months ago appeared headed for its strongest level against a basket of currencies in four years.
Another alternative is a greater reliance on SDRs, the IMF's quasi-currency, which operates as a claim on a basket of currencies: the dollar, euro, sterling and yen.
On July 21st, China tried to allay some of the criticism by revaluing the yuan slightly and switching its peg from the dollar to a basket of currencies.
The bet against the dollar is buying the PowerShares DB US Dollar Index Down ( UDN), which moves higher tracking a basket of currencies including the euro versus the dollar.
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China made headlines on June 19 when it announced that it would release the yuan from its dollar peg and allow the currency to float against a basket of currencies instead.
He believes it is only a matter of time before OPEC decides to value oil in terms of a basket of currencies rather than the dollar, which could prove catastrophic for the dollar.
Switching the peg to a basket of currencies that included, say, the euro and yen as well would give the Gulf states a bit more protection against oil-price swings, but it is hardly a perfect fit.
The weak dollar has inspired a lot of rumor trading, including the idea that several Gulf states, along with Japan, Russia and China, are in talks to start pricing oil according to a basket of currencies.
Given this timidity, China could replicate much of the flexibility of a managed float by shifting the yuan's peg from the dollar to a basket of currencies, at the same time widening the band within which the yuan can fluctuate, say to 10% above or below the peg.
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The USDX measures the value of the US dollar against a basket of currencies that includes the euro, yen, pound, Canadian dollar, Swiss franc and the Swedish krona exactly the currencies that China is most likely including in its own basket and which are now appreciating as a result.
So, if you are looking for the real driver of the market action, you can forget about the headlines for now and simply focus on the action in the dollar. (And for those currency-challenged sorts like me, the UUP provides a nice proxy for the action in the greenback versus a basket of currencies).
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But holding a portion of one's wealth in a basket of foreign currencies is advisable, he says, as a portion of one's consumption over time comes from foreign goods produced both in developed and emerging markets.
In July, American nagging helped persuade the Chinese to move the yuan from its dollar peg and peg it to a mixed basket of currencies, bringing a 2% revaluation in the process (though that has not stopped a Democratic senator, Charles Schumer, from threatening a 27.5% tariff if the yuan does not rise more).
If the dollar falls, the dollar price of a commodity must rise for its overall price in terms of a basket of global currencies to remain stable.
Since 2009 the dollar has fallen 13% against a basket of competing currencies.
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In July, China revalued by 2% and pegged the currency to a basket of foreign currencies, rather than just the dollar.
In anticipation, the greenback slipped against a basket of major currencies.
The shekel's value is set against a basket of foreign currencies.
The index reflects the strength of the dollar against a basket of six currencies: the euro, yen, British pound, Canadian dollar, Swiss franc and Swedish krona.
The third and best option would be to switch the yuan's peg from the dollar to a basket of major currencies in an arrangement similar to Singapore's.
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