Roubini Says Cautious China to Limit Yuan Advance

China will limit the yuan’s appreciation to 4 percent over the next 12 months because of a “super cautious” outlook on the global economy, said New York University Professor Nouriel Roubini, reports Bloomberg.

The central bank may end a 20-month peg to the dollar as soon as the second quarter, allowing a 2 percent one-step gain, and then let the currency strengthen another 1 percent to 2 percent in 12 months, Roubini said during a Bloomberg interview in New York. The yuan rose 21 percent between July 2005 and July 2008, when the government halted its advance to protect exports.

Roubini has spent time in China, and as I have indicated, he is perhaps the most tied in global economist on the planet. If he says China is going to allow an increase in the yuan of 4% that is likely what it will be.

Bloomberg notes that Roubini’s forecast is less aggressive than the median estimate in a Bloomberg survey of 20 analysts for the yuan to rise 5 percent to 6.50 per dollar by March 31, 2011. Bet on Roubini, against the consensus.