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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.

Prof. Succo,

Is a Chinese devaluation of the Yuan positive or negative for the dollar, and why?

Minyan Neal


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.

Prof. Succo

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