Comments on: Stealth appreciation? Or steady depreciation? Take your pick http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/ Thu, 14 Oct 2010 13:09:54 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: bsetser http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103924 bsetser Fri, 11 Jan 2008 07:55:20 +0000 http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103924 90% seems high to me. 70-75% is more likely. The chinese banks held 75% of their fx in $ (based on goldman's work at the end of 2006) and the available US data -- which has its gaps -- doesn't support a 90% $ share. the only way china could use its reserves to appreciate v the euro would be if it stopped selling $ for euros, increasing the $ share of its reserves (it intervenes mostly in $, so it has to sell to keep its $ share from rising). if that pushed the $ up v the euro and the rmb continued to appreciate v the $, the net result would be a rise in the rmb/ euro 90% seems high to me. 70-75% is more likely. The chinese banks held 75% of their fx in $ (based on goldman’s work at the end of 2006) and the available US data — which has its gaps — doesn’t support a 90% $ share.

the only way china could use its reserves to appreciate v the euro would be if it stopped selling $ for euros, increasing the $ share of its reserves (it intervenes mostly in $, so it has to sell to keep its $ share from rising). if that pushed the $ up v the euro and the rmb continued to appreciate v the $, the net result would be a rise in the rmb/ euro

]]> By: dpaul http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103923 dpaul Fri, 11 Jan 2008 06:25:58 +0000 http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103923 Based on the estimate that Chinese government holds more than 90% reserves in US dollar, I was wondering how the appreciation against other currencies, especially Euro, can be done thru currency market intervention on the Chinese side. Based on the estimate that Chinese government holds more than 90% reserves in US dollar, I was wondering how the appreciation against other currencies, especially Euro, can be done thru currency market intervention on the Chinese side.

]]> By: Emmanuel http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103922 Emmanuel Fri, 11 Jan 2008 05:19:27 +0000 http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103922 That first chart is precious. That's what I call a "managed float" for the CNY! All the same, it may be unfair to compare CNY's currency trend with that of EUR, JPY and AUD. I'd toss in those of the BRICs instead and of other East Asians like SGD, TWD, KRW, etc. While I think I understand the point you're making--burgeoning bilateral deficits with the likes of the EU are the result of limited CNY movement--the standard of comparison for CNY movement is against other LDCs, methinks. Professor Roubini (in whom we trust) once wrote that China is, in game theory terms, the Stackleberg leader of LDCs "managing" their exchange rates. In this context, it matters less what the absolute price level of the yuan is, but rather its relative price level vis-a-vis other countries whose goods it's in export competition with. Thinking in these terms, movements in the EUR, JPY, AUD, etc. are not really what our proverbial Party apparatchik watches closely but rather those of fellow export-oriented economies. That first chart is precious. That’s what I call a “managed float” for the CNY! All the same, it may be unfair to compare CNY’s currency trend with that of EUR, JPY and AUD. I’d toss in those of the BRICs instead and of other East Asians like SGD, TWD, KRW, etc. While I think I understand the point you’re making–burgeoning bilateral deficits with the likes of the EU are the result of limited CNY movement–the standard of comparison for CNY movement is against other LDCs, methinks.

Professor Roubini (in whom we trust) once wrote that China is, in game theory terms, the Stackleberg leader of LDCs “managing” their exchange rates. In this context, it matters less what the absolute price level of the yuan is, but rather its relative price level vis-a-vis other countries whose goods it’s in export competition with. Thinking in these terms, movements in the EUR, JPY, AUD, etc. are not really what our proverbial Party apparatchik watches closely but rather those of fellow export-oriented economies.

]]> By: Guest http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103921 Guest Fri, 11 Jan 2008 04:30:14 +0000 http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103921 The pop-up is incredibly annoying. I signed for the trial just to stop the pop-up and it still activates. The pop-up is incredibly annoying. I signed for the trial just to stop the pop-up and it still activates.

]]> By: Guest http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103920 Guest Fri, 11 Jan 2008 03:49:52 +0000 http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103920 what are the QDII numbers from the past ? order 20 billion ? Also, the securities/brokerage firms (not the fund management firms) have started getting approvals for QDII these past few days. price freezes in electricity and oil recently here- utilities and energy companies will start swallowing losses. Not bad to be a Chinese Joe- he didn't really cause the problem, so he shouldn't have to pay. Call it communism/socialism, at least its fair. The average Joe in the US is also not guilty- but he pays the price for a corrupt administration beholden to Wall Street. what are the QDII numbers from the past ? order 20 billion ? Also, the securities/brokerage firms (not the fund management firms) have started getting approvals for QDII these past few days.

price freezes in electricity and oil recently here- utilities and energy companies will start swallowing losses. Not bad to be a Chinese Joe- he didn’t really cause the problem, so he shouldn’t have to pay. Call it communism/socialism, at least its fair. The average Joe in the US is also not guilty- but he pays the price for a corrupt administration beholden to Wall Street.

]]> By: Dave Chiang http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103919 Dave Chiang Fri, 11 Jan 2008 02:25:41 +0000 http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103919 The Global depreciation of the US Dollar versus a basket of currencies is fundamentally driven by the "cheap money" policies of the Federal Reserve. Ben Bernanke is continuing Greenspan's "fire hose" approach to any credit crunch by flooding the US banking system with newly created liquidity. How much longer can the Federal Reserve ignore rising inflationary concerns with Gold rising to a record $890 per ounce in spot trading yesterday? Whatever happened to the monetary principles of "sound money"? The Global depreciation of the US Dollar versus a basket of currencies is fundamentally driven by the “cheap money” policies of the Federal Reserve. Ben Bernanke is continuing Greenspan’s “fire hose” approach to any credit crunch by flooding the US banking system with newly created liquidity. How much longer can the Federal Reserve ignore rising inflationary concerns with Gold rising to a record $890 per ounce in spot trading yesterday? Whatever happened to the monetary principles of “sound money”?

]]> By: kaan http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103918 kaan Thu, 10 Jan 2008 23:05:07 +0000 http://blogs.cfr.org/setser/2008/01/10/stealth-appreciation-or-steady-depreciation-take-your-pick/#comment-103918 Brad, Would you pls open a new thread about 2500USD Tata car. About 2 years ago in your blog i received some sceptical responses about 5000USD chinese cars and its implications to the western industrial supremacy. I think we are going through a historical inflection point. Brad,
Would you pls open a new thread about 2500USD Tata car. About 2 years ago in your blog i received some sceptical responses about 5000USD chinese cars and its implications to the western industrial supremacy.
I think we are going through a historical inflection point.

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