Hi everyone,
As we all know the PBOC decided to devalue the renminbi as concerns have grown over its increase in the last little while since it’s been pegged to the USD and its recent exports numbers were low. I am a little confused though, for the past few years US has been accusing China of currency wars and saying it was bringing the USD down, but how can that be if obviously the opposite has been happening?
Obviously as in USD has been stronger. So why would they accuse China of doing the opposite? Still trying to wrap my head around this one. :34:
The argument isn’t that the CNY rate has been “bringing” the USD down. The issue is that folks feel the CNY is being kept artificially low, which helps to boost Chinese exports.
China needs a plan B
Nick “Moose” Batsford, CEO of Tip TV, opened the Tip TV Finance show today on Tuesday 18th August, alongside technical analyst Zak Mir from ShareProphets.com and chief market analyst from eToro James Hughes, to discuss the main headlines including China and rates.
China to cause problems for the Fed and for oil
Mir highlighted the People’s Bank of China, where he questioned the structure and effectiveness, with only one banker on the policy committee. This led to Hughes’ comment that China is a main issue for the Fed, along with oil, and he reinforces his belief of a 2016 rate hike. He continued that China will also have an effect on oil, with their demand falling with the weakening economy, whilst Mir finished the section by noting that China needs to come up with a plan B.
See more at: China needs a plan B, Fed rate hike remains data dependent | TipTV.co.uk
This article from Piponomics might clear things up a bit: How the PBOC Yuan Devaluation Could Affect Forex Trends
In a nutshell, China wants its currency to depreciate in order to make its products more affordable in the international market (higher exports) and at the same time to make imported goods cheaper (higher consumer spending), both of which could contribute positively to overall economic performance. It does seem like a desperate attempt from the central bank to spur growth, especially since the stock market has been tanking lately.