WSJ.com is available in the following editions and languages:
Thank you for registering.
We sent an email to:
Please click on the link inside the email to complete your registration
Please register to gain free access to WSJ tools.
An account already exists for the email address entered.
Forgot your username or password?
This service is temporary unavailable due to system maintenance. Please try again later.
The username entered is already associated with another account. Please enter a different username
The email address you have entered is already in use.Please re-enter the email address.
From time to time, we will send you e-mail announcements on new features and special offers from The Wall Street Journal Online.
Create a profile for me in the Journal Community
Why Register?
Privacy Policy | Terms & Conditions
As a registered user of The Wall Street Journal Online, you will be able to:
Setup and manage your portfolio
Personalize your own news page
Receive and manage newsletters
Receive and manage newsletters
Keep me logged in. Forgot your password?
Digg
On June 19, China made headlines by announcing that it was unmooring its currency somewhat from the dollar and letting it move in a “flexible” fashion. While Beijing warned against expecting big currency movements, the expectation globally was that the yuan would appreciate significantly against major currencies.
Two months later that hasn't turned out to be the case. The yuan appreciated at most about 1% against the dollar and is now trading at nearly the same rate as it did on the day before the currency announcement. (Overall, the yuan has appreciated by about 0.4% against the dollar.)
Meanwhile, the dollar has depreciated against the euro and yen — which means that the yuan has fallen against both currencies too, giving Chinese exports a further competitive advantage. (The yuan has depreciated 3% against the euro and 6.4% against the yen over the last two months.)
To Eswar Prasad, a Cornell university economist who used to head the International Monetary Fund's China desk, the Chinese moves show how shrewd Beijing is. “In hindsight, it was a masterstroke for China to announce greater yuan flexibility against the dollar right about when the dollar had peaked,” he says.
In the short term, that's probably correct. But longer term, the Chinese currency policy is bound to stoke protectionist sentiment in the U.S., Japan and Europe, and consternation in developing nations that compete with Chinese exports.
It's an open question whether there is enough time left before November elections for Congress to pass punitive measures aimed at China's foreign-exchange policy. But Democrats are planning to push a manufacturing-relief bill this fall, which could become a home for anti-Beijing legislation.
Mr. Prasad says the Chinese are probably figuring they can manage the politics by letting the yuan quickly rise against the dollar by 1% to 2%. “If the Chinese see the political winds start blowing in a way that could hurt them, they'll allow their currency to bump up,” he says. “They feel that could take pressure off.”
Yahoo! Buzz
MySpace
Digg
del.icio.us
NewsVine
StumbleUpon
Mixx
Error message
Believing a floating Yuan will save the US economy by balance trade is a dangerous baseless assumption to hold. The Japanese Yen floats, the Euro floats and both are very expensive compared to the dollar, but it hasn’t but a dent into US-Japanese and US-Euro trade balance. Why should I believe a Chinese Yuan reevaluation will make any difference, if Japanese and European trade deficits hasn’t seen a difference..
Typical Chicom lies and misdirection modes.
Real Time Economics offers exclusive news, analysis and commentary on the economy, Federal Reserve policy and economics. The Wall Street Journal’s Phil Izzo and Sudeep Reddy are the lead writers, with contributions from other Journal reporters and editors. Send news items, comments and questions to realtimeeconomics@wsj.com.
Read more Economics coverage.
WSJ.com is available in the following editions and languages:
Thank you for registering.
We sent an email to:
Please click on the link inside the email to complete your registration
Please register to gain free access to WSJ tools.
Read Full Article »