Exaggerating the Rise of the Yuan

The internationalization of the Chinese yuan has been a major story this year.   We have been suspicious that much of what passes for the internationalization yuan has been the “Sino-ificiation of Hong Kong and symbolic measures like numerous swap lines, none of which have been used. That Chinese trade with its special administrative region Hong Kong […]

China Says No to Bitcoins, but Yes to the Russian Rouble

Last week, just as some a couple of bank analysts suggested that central bank may use the bitcoin for reserves and that fair value as higher than prevailing prices, China banned its banks from trading the digital currency.  Over the weekend, Baidu,  China’s biggest internet portal reversed itself and indicated it would no longer facilitate the […]

Germany and the Euro-Surrealpolitik

This articles reviews the theory behind Optimum Currency Areas and the lack of willingness in the European Union and particularly of Germany to lead the process of political and fiscal unions. With Britain maintaining its euro-skeptical status and France and Italy immersed in political crisis, there remains little hope that the Eurozone will ever become […]

Bitcoins, Dollars and Renminbi

Reports indicate strong Bitcoin interest in China.  BTC, the China-based Bitcoin exchange accounts (trading a third of all Bitcoin transactions, while China may account to close to half of the daily turnover,  according to some internet reports) at an estimated 200k Bitcoins a day. Registered participants on BTC is reportedly near 10k and rising quickly […]

Has the Dollar Really Lost 97% of Its Value? (No)

  One of the favorite tropes of the “End the Fed” crowd is the “falling purchasing power of the U.S. dollar.” Google that phrase, and you will be rewarded with 91,100,000 results. (drop the “U.S.” and it doubles to 187,000,000 results). The problem is, nearly all of these arguments are wrong. As Matt Busigin of Macrofugue points out (echoed […]

Raining on the Parade

The US dollar is consolidating yesterday’s gains against most of the majors, with two notable exceptions.  Perceptions of heightened prospects for Fed tapering has pushed up US Treasury yields and lifted the dollar to its highest level against the yen since July,  just shy of JPY101.   Ironically, the low yielding yen’s weakness has been largely […]

Stop the Press: IMF Concludes the A$ is 10% Overvalued

News that the IMF has concluded that the Australian dollar is about 10% overvalued and that is accommodative monetary policy was seized upon as an excuse to extend the Aussie’s losses to new lows for the day, near $0.9365.  However, there is really no news content there and bid were seen ahead of yesterday’s low near […]

Dollar Flat, Awaits Inspiration

The US dollar is little changed amid a light new stream.  There are three notable developments.   First, the yen is staging a bit of a recovery from its recent slide.  The dollar has pulled back after approaching the September high near JPY100.65.  The euro is slipping after nearing last month’s high.   This seems largely a […]

FX Market Responding to Fundamentals

Ahead of Thursday’s BOE and ECB meetings and Friday’s US jobs data, the foreign exchange market is responding to fresh fundamental developments.  Three developments in particular stand out. First, China’s service sector PMI showed a small gain in Oct, rising to 52.6 from 52.4.  Of note, new business stands at a 7-month high.  Talk of a […]

American Debt, Chinese Anxiety, Elaborated

Or, how the Tea Party is working hard to sabotage the dollar’s role in global finance. Figure 1: Share of publicly held Treasury debt held by foreign residents (blue squares), and held by China (red triangles). Solid squares/triangles denote data from annual benchmark surveys; open squares/triangles from monthly series. Source: TIC, and St. Louis Fed FRED.From my […]

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