Asia Forms Forex Pool

After nearly six months of currency depreciation, the nations of Asia have finally been spurred to action. Japan, China, and South Korea have joined together with the 10 ASEAN economies to form a $120 Billion pool of foreign exchange reserves, which contributors can tap into to protect their currencies. The goal is to prevent capital flight and currency weakness from engendering the same kind of financial crisis that only 10

Asia Forms Forex Pool

After nearly six months of currency depreciation, the nations of Asia have finally been spurred to action. Japan, China, and South Korea have joined together with the 10 ASEAN economies to form a $120 Billion pool of foreign exchange reserves, which contributors can tap into to protect their currencies. The goal is to prevent capital flight and currency weakness from engendering the same kind of financial crisis that only 10

Yuan Revaluation is in China’s Interest

While China remains committed, in rhetoric at least, to a flexible Chinese Yuan that rises and falls in accordance with market forces, its actions suggest otherwise. Beginning in the second half of 2008, China stopped allowing the Yuan to appreciate, for fear that a more expensive currency would exacerbate the domestic effects of the credit crisis by making exports less competitive. What China fails to realize however,

Yuan Revaluation is in China’s Interest

While China remains committed, in rhetoric at least, to a flexible Chinese Yuan that rises and falls in accordance with market forces, its actions suggest otherwise. Beginning in the second half of 2008, China stopped allowing the Yuan to appreciate, for fear that a more expensive currency would exacerbate the domestic effects of the credit crisis by making exports less competitive.

Yuan Revaluation is in China’s Interest

While China remains committed, in rhetoric at least, to a flexible Chinese Yuan that rises and falls in accordance with market forces, its actions suggest otherwise. Beginning in the second half of 2008, China stopped allowing the Yuan to appreciate, for fear that a more expensive currency would exacerbate the domestic effects of the credit crisis by making exports less competitive. What China fails to realize however, is that a more valuable Yuan is not only conducive to global economic stability, but also to its own economic

Japanese Yen Braces for Intervention

After months of speculation, it appears that forex markets have finally concluded that the Central Bank of Japan is now prepared to bring down the Yen. On the one hand, the Finance Minister of Japan very publicly denied that the overvalued Yen and the consequent need for forex intervention was discussed during either his personal conversation with US Treasury Secretary Geithner or at the most recent G7 conference. At the same time, he pledged the willingness of Japan to fight “excessive swings” in forex and capital markets.

ECB Hints at Rate Cut

At its next meeting, to be held in March, the European Central Bank is all but certain to bow to pressure and cut its benchmark interest rate to a record low. This should not come as a surprise, for the ECB’s February decision to hold rates constant was met with a large outcry, in both public and private circles. Soon-to-be-released inflation data is expected to confirm that prices are

Forex Reserves Backfire

Prevailing wisdom has long held that the accumulation of foreign exchange reserves has helped stabilize emerging market economies by cushioning them against economic shocks. The economies of Asia, in particular, were praised by economists for responding to the 1997 Southeast Asian economic crisis by building up their reserves to guard against runs on their currencies in the future. In hindsight, however, the

Chinese Yuan: Up or Down?

Speculation surrounding the Chinese Yuan has been mounting for months, beginning with a sudden halt to the currency's appreciation and continuing with the insinuation of the Obama administration that China is a currency manipulator. In the context of falling exports and a sagging economy, meanwhile, the Chinese Ministry of Finance has issued a research report encouraging the Central Bank to allow the currency to

Chinese Yuan: Up or Down?

Speculation surrounding the Chinese Yuan has been mounting for months, beginning with a sudden halt to the currency's appreciation and continuing with the insinuation of the Obama administration that China is a currency manipulator. In the context of falling exports and a sagging economy, meanwhile, the Chinese Ministry of Finance has issued a research report

Chinese Yuan: Up or Down?

Speculation surrounding the Chinese Yuan has been mounting for months, beginning with a sudden halt to the currency's appreciation and continuing with the insinuation of the Obama administration that China is a currency manipulator. In the context of falling exports and a sagging economy, meanwhile, the Chinese Ministry of Finance has issued a research report encouraging the Central Bank to allow the currency to

US and Japan Should Form “Forex Partnership”

While continuing to deny the possibility of direct forex intervention, Japan is nonetheless desperate to halt the rise in the Yen. The primary concern of the US government, meanwhile, is not that the Dollar is becoming too valuable, but rather that it will face great difficulty in funding its economic stimulus plan. Perhaps there exists a golden opportunity to simultaneously alleviate both of these quandaries; Japan should be solicited to buy US

Strong Dollar Hurts US Businesses

While the year-long surge in the Dollar has been a welcome development for American consumers and the US government (in terms of cheaper imports and easy credit, respectively), American businesses are not smiling. The strong Dollar has resulted in decreased competitiveness in the eyes of foreign consumers, and consequently, lower exports. For this reason, the US trade deficit has not shrunk significantly, despite a slight down-tick in imports. One must also look at the

ECB Holds Rates

After "profound" debate, the European Central Bank voted yesterday to hold its benchmark interest rate constant at 2%. Despite the acknowledged fact that EU inflation has slid to the lowest level in a decade, the ECB remains unconvinced that it has been tamed. It is apparently concerned that further interest rate cuts could trigger a loss of confidence and hyper-inflationary spiral, from which it would be difficult to escape.

US Must be Careful with Chinese Yuan Issue

It appears Timothy Geithner, recently-appointed US Treasury Secretary, was not exaggerating when he declared that the Obama administration intends to address China's currency policy. No less than President Obama himself rrecently called Hu JinTao, President of China, to inform him likewise. Unfortunately, the administration does not exactly have support from political and economic analysts. They argue that not only is the Yuan's "true" value debatable, but also that now is not an opportune time to pursue this issue, due

British Pound: It’s All Relative

Since the inception of the credit crisis, perhaps no currency has been beaten down more than the British Pound, with analysts bitterly divided about whether the currency will fall further. A lot depends on whether the British efforts to save its devastated banking sector are successful. The government has already moved to nationalize the Bank of Scotland, and is quickly moving to shore up the capital positions of other vulnerable