China's central bank announced over the weekend that it would unhitch the Yuan's value to the US dollar and allow it to gradually strengthen. As of Monday, the Yuan's exchange rate rose to 6.8 to the dollar from 6.83, where it had hovered for two years-unlike other currencies which rise and fall against the dollar on the open market.
Although China's plan, called a return to the "managed floating exchange rate" that it practiced from mid-2005 to mid-2008 (resulting in a 21 percent gain against the dollar), will be gradual, it will benefit many American industries, such as steel and coal.
US steel companies will gain a competitive edge if Chinese steel products become more expensive, while steel's end-use markets such as automotive and machinery will also benefit with increased exports to China.
China is the largest coal consumer in the world, and although it imports most of its coal from Australia, US coal companies could gain market share in China if it is less expensive than it is now.
Reaction to the move has been mostly favorable, but the immediate impact is expected to be moderate, due to the gradual nature of the revaluation. US stocks on the Dow Jones Industrial Average rose 145 points Monday in reaction to the weekend news, but steadily declined throughout the day to settle at 10,423 (down 27 points).