Today, it was a move in the Chinese currency that slowed the momentum in markets. In agreement with their major trading partners, they began appreciating their currency in an effort to allay trade tensions and threats of trade sanctions. This time around, the Chinese have complained about the threat of capital flowing out of the country – its a huge threat to their economy in its current form. Today’s move, which included a spike in the overnight yuan borrowing rate, was a way to crush speculators that have been betting against the currency, putting further downward pressure on the currency.
Key Takeaways:
- China’s currency is a big deal to everyone. It’s the centerpiece of the tariff threats that have been levied from the U.S. President-elect.
- As we know, China, itself, sets the value of its currency every day. It’s called a managed float. They determine the value. And for the past two years, they’ve been walking it lower — weakening the yuan against the dollar.
- This time around, the Chinese have complained about the threat of capital flowing out of the country — it’s a huge threat to their economy in its current form. That’s where they’ve laid the blame, on the two-year slide in the value of the yuan.
“The Chinese revalued its currency — pegged it higher by a little more than a percent against the dollar.”
http://www.forbes.com/sites/bryanrich/2017/01/05/will-china-derail-the-stock-market-train/
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