Minyan Mailbag - Chinese Yuan
Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.
Is a Chinese devaluation of the Yuan positive or negative for the dollar, and why?
If the Chinese de-linked the yuan from the dollar, which is now pegged at around 8.27 yuan per dollar, the initial reaction would be for the dollar to weaken against the yuan. This is based on the current capital flows between these two countries.
Even a 10% yuan strengthening should have the effect of increasing U.S. treasury yields as less capital would flow into the U.S. from China.
After this initial reaction (and I do not know how severe this would be) it is possible that the yuan would weaken from there if (and this is a big if) Chinese citizens would use the opportunity to push some of their savings into the U.S. at the more advantageous exchange rate.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter