Currency Battle

I’ve been treading a bit on the US currency battles with Asia and figured i’d post some of the articles… possibly start a discussion on it.

I think that this is an interesting case fo international politics that impacts us so directly what with the purchasing power of our dollars. Particularly for Canadians buying goods in the US.

Firstly, the US is backing off of China it appears??

US Backs off of China in Currency Battle

Sounds like the US dollar could be down for a while but that it’sa good thing?

This article is a good quick and dirty of the what, how, why: Asian dollar fall is good for the world

[quote=“reuters”"]

The (US) dollar this week touched its lowest level for 2010. That little Singapore’s adoption of a higher trading band helped trigger the sell-off adds to the talk of its demise. The expectation of more quantitative easing at home is certainly not helping the U.S. currency. But the relative rise of Asian currencies is a good thing. Global rebalancing has been called for: this is it.

Asian currencies need to revalue. Many economies are growing fast, with exports a key driver. The countries run trade surpluses and also attract large capital flows. Their response has been to try to prevent currency appreciation. That means soaring foreign exchange reserves, excess money growth — and the risk of inflation and asset bubbles.

Take Singapore. The government expects GDP growth of between 13 percent and 15 percent this year. The Monetary Authority of Singapore is worried that inflation will “rise to around 4 per cent by the end of 2010 and stay high.” Appreciation of the Singapore dollar would help by reducing the cost of imported goods. And Singaporean consumers won’t say no to cheaper imports — they’ve earned them.

Other Asian economies see similar pressures but are not all reacting the same way. South Korea’s inflation rate has risen to 3.6 percent but the central bank this week held back from raising its 2.25 percent policy rate for fear of pushing the won still higher.

The big outlier, however, is China, whose fixed exchange rate has been allowed to rise by only 2 percent against the dollar since June, after being fixed for the previous two years. For the rest of Asia, this means that allowing currencies to appreciate against the dollar means losing competitiveness to China — a clear deterrent to revaluation. The likelihood is that at the G20 meeting in Seoul in November many Asian countries will press China hard to let the yuan rise faster.
The trend, however, is clear. Rapid growth tends to lead naturally to currency appreciation. Provided it is allowed to happen, that will stoke import demand in Asia, helping depressed western economies recover. For all the gloom, the dollar’s fall isn’t harmful.
[/quote]

As of today we’re at 98.54% or $0.9854 CDN for 1 US buck…

Usually that is not good for us seeing as how the US is by far our primary export destination.

However, it should make US exports quite attractive internationally… too bad you guys don’t make much anymore.

Your dollar moves with oil. Ours basically moves inversely with the S&P 500. The CADUSD gains were due to crude spiking this week moreso than what’s going on with the asian currencies.
If you want a quick chart comparison, run CADUSD, the S&P 500, and USO on the same chart on google finance.

As for the asian markets, a cheap dollar benefits the US rich. An expensive dollar benefits the working and middle classes.

run that chart for me please

This isn’t perfect because it uses a crude oil ETF, instead of the actual oil price, and it’s only year-to-date, but it gives you a pretty good idea. The big may drop was magnified greatly in USO as opposed to the actual crude price.

Basically the CADUSD price has two factors… When investors are scared of risk, they buy US Treasuries and drive the USD price up, and the CAD and S&P 500 prices down. When oil goes up, it drives the CAD up, and the USD price down since we import oil.

yeah that makes little sense to me.

Reuters article on Geithner’s vow not to devalue the dollar… ARTICLE

Don’t forget the impact of precious metals as well with oil.

meh, i’m interested in the inter-nation politics… particularly since the US won’t touch China on the issue too heavily… where as if it were Iran they would sanciton the shit out of them. I think it’s a telling sign.

So speaking of currency battle…The market took a nice hit today as China raised interest rates.

The PM bubble with burst one of these days…

Please enlighten me with the insights that brought you to this conclusion!

20% decrease in the dollar over the next couple years???

History…Gold has just barely kept up with inflation in the last 200 years. What goes up (as in, WAY up) is bound to go… pop

Bonds and PM are quite possibly the new/next bubbles. Bond yields at long term support. USD at long term support. Paper markets at resistance.
Might get interesting very soon here.

China not approving of monetary easing… stating it wont lead and will only think of china’s best interests.

reuters