[thuja]

China had a competitive advantage by artificially pegging its currency to the US dollar, its major trading partner. By not allowing it's currency to appreciate in the open market due to its high level of ecomonic growth, China became the low cost global manufacturing source. The revaluation of China's currency will slow its growth, by making it's exports more expensive. One possible side effect would be curtailing increased Chinese demand for oil.

What effect this will have on the US dollar remains to be seen. In the US gov't has been pushing China really hard behind the scenes to brake the currency peg.

As stated above the US currency has enough major issues of its own already: the current account deficit, the budget deficit, and the real estate asset bubble (Greenspan's legacy). The only thing needed to send the US currency into a freefall right now, would be if foreign investors on masse decided to stop refinacing the current account deficit through their ongoing purchases of US government securities.

US citizens should think seriously about protecting their personal wealth in the event of a drop in the US dollar. Think about diversification to reduce your risk exposure. If all your wealth is in the US, your portfolio is not divirsified.

Look at holding some other currencies such as the Euro, or holding stock of foreign companies. Gold is always an excellent hedge against currency depreciation. Gold tends to retain its value in crisises in real dollar terms. Oil also has intrinsic value as a desired global commodity. Oil is also good for diversification as it's commodity price is inversly co-related to the US stock exchanges.

How much you diversify depends on what probablity you assign to the US currency having a major devaluation in the medium term, but I would think at least 10% of your portfolio should non US dollar demoninated.