Business this week

China surprised markets by ending the peg of the yuan to the dollar, a policy that was reintroduced in July 2008 during the financial crisis. The yuan's movement is still restricted to a rise or fall of no more than 0.5% against the dollar in a single day—it appreciated modestly soon after the announcement. Some politicians in America complain that China's currency regime keeps its exports artificially cheap and a debate began on whether China was serious about a flexible currency policy, or if it was just manoeuvring to avoid criticism ahead of a G20 summit. See article

Underlining the attractiveness of gold as an investment haven, Saudi Arabia's gold reserves were said to be more than twice as high as previous estimates, according to the World Gold Council. The kingdom is thought to hold 323 tonnes of the precious metal, which is trading at record high nominal prices. Gold still accounts for only 2.8% of the Saudi central bank's total reserves.

Shaky foundations

After a tax credit ended for housebuyers, sales of new homes in America slumped by a much-higher-than-expected 33% in May compared with April, to 300,000 at an annual rate. The figure underlined the fragility of America's recovery. The Federal Reserve again kept interest rates near zero for an “extended period”, but its accompanying language on the economy was markedly less optimistic than in recent months.

Analysts pondered the decision by the European Union to release the results of “stress tests” for banks in July. The tests assess if capital reserves are adequate to withstand a severe downturn. The decision came after Spain moved to publish the results of an evaluation of its banks. It remained unclear whether the EU's tests would go beyond Europe's 25-odd biggest banks and if they would factor in the risk from sovereign debt held in southern Europe. See article

Portugal's central bank revealed that Portuguese banks borrowed €35.8 billion ($44.9 billion) from the European Central Bank in May, double the amount in April, as the euro-zone crisis made it increasingly difficult for the banks to raise funds through capital markets.

BASF, the world's biggest chemical company, diversified its business by agreeing to buy Cognis, which makes ingredients for food and cosmetics, in a €3.1 billion ($3.8 billion) deal.

Dudley do right

BP said its costs so far from trying to contain the oil spill in the Gulf of Mexico had risen to $2 billion. Tony Hayward, the company's hapless chief executive, turned over day-to-day leadership of the clean-up effort to Robert Dudley, who used to head BP's operations in Russia. See article

Meanwhile, the Obama administration appealed against a judge's decision to overturn its moratorium on drilling in deep waters, which was introduced after the explosion on the rig that caused the disaster in the gulf. Several oil-services companies and politicians in Louisiana have challenged the drilling ban on the grounds that it is arbitrary and has a negative economic impact on the region.

Brazil's Petrobras postponed until September a planned share issue that is expected to raise $25 billion. Questions have been asked about the energy company's $224 billion spending commitments on various projects, such as developing offshore-oil assets. Petrobras said it was putting the share issue on hold because of a delay in a government valuation of its offshore reserves.

In a significant legal victory for YouTube, a judge ruled that the website had not infringed copyright laws by hosting copyrighted material on its website. Viacom brought the $1 billion claim three years ago, alleging that YouTube, which is owned by Google, was aware of the practice. But the judge made a distinction between a “general” awareness and a “specific” awareness of an infringement, and said YouTube had responded to any specific violation by taking the material down.

The Department for Transport in Britain launched a sale of the rights to operate the high-speed rail line that connects London to the Channel Tunnel. The auction could fetch up to £2 billion ($3 billion).

A sense of well-being

The Access to Medicine Foundation, which is funded by governments and charities, including the Gates foundation, published a study on the efforts of 27 drug companies to provide medicine to the developing world. The ranking is based on more than 100 indicators, such as equitable pricing, patents and philanthropic work. The top three spots were taken by GlaxoSmithKline, Merck and Novartis, which are “unique in taking risks and experimenting with new business models”.