Effects of China Strengthening Its Currency... Mish Shedlock considers what could happen if China revalues its currency higher, as demanded by the US... "To get a 40% rise in valuation, China must buy or sell unlimited amounts of RMB [China's currency] against the dollar to maintain the desired price. That might mean a huge hike in Chinese interest rates to make holding the RMB attractive... In turn, sharp interest rate hikes would likely cause a huge slowdown in China, decreasing China's demand for imports... the consequences of such a slowdown would be huge on the commodity exporters like Canada and Australia. Moreover, a slowdown in trade would slow global consumption"... lots of links to related articles on China's currency... http://globaleconomicanalysis.blogspot.com/2010/03/pressure-increasing-on-china-to-revalue.html (4*)