China revalues renminbi - no dominoes tumbling yet

there's been lots of speculation that a major revaluation of the chinese currency could force a hike in u.s. treasury bond interest rates (necessary to satisfy china's need for a higher return rate on china's u.s. treasury bond holdings, offsetting the higher price they would be paying for the bonds) which could, in turn, spark increases in u.s. mortgage interest rates which could, again in turn, pop the u.s. real estate bubble... however, it doesn't look like this revaluation will be enough to set the wheels in motion...

China bowed to months of market and political pressure on Thursday by revaluing the yuan [renminbi] by 2.1 percent and abandoning the currency's decade-old peg against the dollar.

[...]

The new rate, initially, will be 8.11 yuan per dollar, well short of the 10 percent revaluation that Washington had been seeking to head off protectionist pressure in Congress.

[...]

Foreign pressure has been especially intense in the United States, where many law-makers blamed their country's $162 billion 2004 trade deficit with China on an unfairly cheap yuan.

Senators were preparing a bill that would have slapped a 27.5 percent tax on Chinese imports if Beijing did not revalue but last month delayed a vote on the measure after U.S. Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan said it would be counterproductive.

[...]

To keep the yuan's exchange rate fixed, China was obliged to buy up huge quantities of dollars. Its foreign exchange reserves swelled to $711 billion at the end of June, the world's largest stockpile after Japan's. Much of the money has been invested in U.S. bonds, helping to keep U.S. interest rates low.

what makes absolutely no sense to me is why the u.s. would be so hell-bent on chinese revaluation when the downside risk for the u.s. real estate market could be so disastrous... then again, i'm probably making a cardinal mistake thinking that conventional reason even applies...

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