The Chinese yuan has gone from being controversially weak to uncomfortably strong:

Category: Currency, Video

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4 Responses to “Yuan: Redback Rising”

  1. Willy2 says:

    The yuan is certainly overvalued. Becase the PBoC – according to my info – has intervened to support the yuan. Capital is fleeing China. What do you mean “yuan overvalued” ?

    Remember this video with Hugh Hendry ?
    http://www.ritholtz.com/blog/2013/05/hugh-hendry-investing-amidst-crashes-china-speculators/
    He’s wrong on one more account. Hendry (wrongfully) assumes that China +Japan are short their own currencies. Since, say the year 2000, China has bought tonnes of T-bonds to surpress the yuan against the USD. But when one is long T-bonds then at the same time one is also short USD. Now capital is fleeing China it must sell T-bonds to acquire USDs. (rising USD/Yuan anyone ???).

    • Willy2 says:

      Same story for Japan. Since, at least 1970, Japan has been running Current Account Surplusses (CAD) (i.e. an inflow of money/USD) and bought tonnes of T-bonds. But since 2011 (Fukushima) that CAD has turned into Current Account Deficit. And that forces Japan to start selling its T-bonds to aquire USDs. (Rising USD/yen anyone ?)

  2. asiavoice says:

    Dollar strength despite quantitive easing by the central bank is only possible because most of the creditor nations are still pegged to it. Unlike JPY which attempted to do the same trick as helicopter Ben, it’s currency has come off more than 20%. CNY internationalisation will eventually occur, but it may be at the expense of the USD. The world is upside down when experts are still referring to hard currencies as being a basket of developed nation currencies where the Central Banks print money. We just wonder now what losses has Mr Benanke and some financial institutions have now on their book of bonds. We may well be addicted to QE as normalisation is hard to do.

    • Angryman1 says:

      I don’t agree with this at all. Most “QE” is in denominated MBS, very little actual currency purchases.

      Thus capital inflight to the US from Europe(mainly) and Asia is supporting the dollar and has been for a while.