After years of exhorting China to increase the value of its yuan, the currency is finally rising. Why that's so is the result of the Fed's quantitative easing program. Here's how Bernanke managed to succeed where political wrangling fell short.
China's economy is booming, and Western nations are increasing their demands that its currency be allowed to rise to its natural value. Who knows if that will happen, but if you want to bet that it will, the Bank of China just made it easier: Now, Americans can open renminbi-denominated accounts.
The dollar is looking mighty attractive, thanks to a reviving U.S. economy and eurozone woes, and it will only get stronger as traders who gambled that it would fall buy dollars to unwind their bad bets. Add in China's desperate need to get its overheated economy in check, and commodities prices look like they have nowhere to go but down.
The Dow tumbled Tuesday as part of a global sell-off in stocks fueled by further speculation that China will hike interest rates to fight inflation and renewed worries over the wobbly finances of Ireland, Portugal and Greece.
The seemingly symbiotic relationship between the China and America -- dubbed Chimerica -- is now clearly chimerical. What was once billed as the ideal partnership is quickly turning into a competition for global influence. Investors, beware.
Leaders of 20 major economies on Friday refused to back a U.S. push to make China boost its currency's value. Despite some face-saving rhetoric, that will keep alive fears of a global trade and currency war amid criticism that cheap Chinese exports are costing American jobs.
The U.S. finds itself on the wrong side of the currency manipulation argument this week, as many G20 countries criticize the Fed's $600 billion bond buying plan, which could further devalue the dollar. World leaders say the move breaks the vow of unity made during the last G-20 summit.
In Asia on Tuesday, Hong Kong's Hang Seng Index rose 0.1%, China's Shanghai Composite inched down 0.3%. and in Japan, the Nikkei 225 crept up 0.1%. Investors are closely monitoring the U.S. midterm elections, with many predicting that if the Democrats lose their majorities in both the House and the Senate, the dollar will continue to slide.
Analysts lately have loudly proclaimed the end of the dollar, leaving investors looking to stay ahead with a choice of betting on stocks, which have 17% fallen in the last decade, or staying "safe" in very low-yield money market funds. But there is an alternative: commodities.
China surprised international markets Tuesday by raising key interest rates for the first time in three years. The move sparked a worldwide sell-off on worries that it could cause the Chinese economy to slow down.
The U.S. will not weaken the dollar in order to boost its exports, Treasury Secretary Timothy Geithner promised. "It is not going to happen in this country," Geithner told Silicon Valley business leaders of devaluing the dollar.
The U.S. trade deficit unexpectedly jumped to $46.3 billion in August, as the nation's deficit with China surged to a record $28 billion. Oil prices were the other key culprit as the petroleum deficit surged 5.7%.
The threat of a global currency war is heating up after global leaders failed to resolve their differences at International Monetary Fund talks that ended Saturday.
Investors take note: Despite the calls for order, national policymakers are dealing with an increasingly haphazard scenario loaded with counterproductive results and unintended consequences. The result could be a slide toward protectionism.
With elections near and joblessness still so high, Congress and even the Fed are chasing short-term solutions that won't really help matters. More finely targeted policies would be effective, but don't expect any until, with luck, after Nov. 2.
A bill, passed by the U.S. House of Representatives Wednesday, would let U.S. companies petition for duties on Chinese imports -- a move that would hurt the global economy if it became law, the Chinese government said.
A widespread push for fiscal discipline is "the right policy at the wrong time," the famed investor said Wednesday.
China's global trade surplus ballooned to $28.7 billion in July, a sign that promises to adjust its currency haven't yet begun to bite. That could spell increasing friction with Washington.
China's central bank said it will allow more flexibility in the exchange rate of its currency, the yuan. This seems intended to help foreign economies as China's shows increased strength. Critics have said an undervalued currency gives China an unfair trade advantage.
