NEW YORK — Retail analysts are weighing the impact of the revaluation of the Chinese yuan and its effect on pricing.
As long as the Chinese yuan revaluation does not push the currency higher than 5 percent over the dollar, the impact on most broadline retailers should be “non-material,” Deutsche Bank Equity Research analyst Bill Dreher said last week.
In a separate report, a team of Goldman Sachs analysts said the revaluation on the luxury goods sector should drive demand while pushing up costs for all companies sourcing goods in China.
Dreher said the yuan, which is no longer pegged against the dollar but against several foreign currencies, resulted in a 2 percent revaluation against the dollar — well below the 10 percent called for by American policy makers.
“The yuan revaluation could potentially accelerate inflation, leading to a greater than anticipated rise in interest rates,” he said.
Regarding consumer spending, Dreher said retailers such as Wal-Mart, which imports about $17 billion of goods from China, could be hurt by the revaluation. Dreher said if the yuan rises higher against the dollar, it would essentially be a tax on the consumer with the “low-end consumer the most vulnerable.”
“Fortunately, it appears China’s move could be gradual, allowing both consumers and companies to adjust their expectations and budgets smoothly,” he added.
In the Goldman Sachs report, analysts Matthew Fassler, Margaret Mager and Adrianne Shapira said the currency revaluation “is an overall negative for the retail sector, but with limited impact” while the “initial currency hike affects cost of goods through higher labor costs.”
“On the demand front, the luxury sector stands to benefit most as strengthened Asian currencies spur spending in the region and travel to U.S.,” the analysts said.