MONEY WATCH.

Make no mistake: China didn't do all Americans a favor by agreeing to revalue its currency. For some time, U.S. officials have pleaded with the Chinese to allow the yuan to float more freely rather than pegging it so strictly to the dollar. That's because the weak dollar has made Chinese goods sold abroad that much more attractive, putting a crimp on U.S. exports. Last week, China finally complied, raising the value of the yuan versus the dollar and then agreeing to unhitch it from the greenback, linking it instead to a basket of foreign currencies. "China's full implementation of its new currency regime will be a significant contribution toward global financial stability," said U.S. Treasury Secretary John Snow. But even though U.S. manufacturers may have gotten what they wanted, many segments of the U.S. economy don't necessarily win. For starters, though China revalued earlier than expected, it did not go as far as some had hoped. China allowed the yuan to strengthen by about 2 percent against the dollar. Ashraf Laidi, chief currency analyst with MG Financial Group, was "expecting China to revalue later in the year by as much as 3 to 5 percent." For U.S. consumers, the fact that Chinese goods sold here will now be more expensive means inflation will remain a cause of concern. For U.S. companies that buy parts and services from China (whose red-hot economy grew by 9.5 percent in the second quarter compared with a year earlier), costs could rise and profit margins shrink. This is particularly true of retailers and technology firms, says Sam Stovall, chief investment strategist for Standard & Poor's. For U.S. homeowners, it could mean a temporary end to record-low mortgage interest rates. After all, if the Chinese stop buying as many U.S. dollars to support their currency, they're likely to purchase fewer treasury bonds, which means bond yields should rise. Last week, the yield on the 10-year treasury note jumped from 4.18 percent before the announcement to 4.28 percent. And finally, for U.S. critics of Chinese attempts to purchase American companies, this could be trouble. If the Chinese currency strengthens, so too does the ability of Chinese investors to buy publicly traded U.S. firms, just as China's state-owned oil giant CNOOC is trying to buy California-based Unocal.