Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.

China's Lifting of the Peg: Good for Business, or Too Risky?

On Monday, Wall Street surged on the initial news that China will allow the yuan to rise against the dollar. The news is good for companies that supply commodities and equipment to China, because U.S.-made equipment will be comparatively cheaper there, while Chinese-made goods will be more expensive in the U.S. That gives manufacturers competing against Chinese companies an advantage here.

According to a Reuters report, companies with significant international presence, like Caterpillar (NYSE: CAT  ) , Yum! Brands (NYSE: YUM  ) , and Ethan Allen (NYSE: ETH  ) , said the move would likely be a positive for their business.

However, as the report warns, there are important risks that investors shouldn't overlook: "An economic slowdown in Europe could weaken the yuan against the dollar ... If weakening European demand hurts Chinese exports, the yuan could fall versus the dollar, rather than rise."

Is China's lifting of the peg ultimately a good thing, or are there too many risks involved? Let us know what you think in the comments box below.

Claire Stephanic does not own any of the companies mentioned. Motley Fool Options has recommended a bull call spread position on Yum! Brands. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1215136, ~/Articles/ArticleHandler.aspx, 3/5/2015 11:22:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!