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Yuan falls to 11-year low

bloomberg.com

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Re: Yuan falls to 11-year low

#51

Post by jonathankoren »

ccarpenterg wrote: post #46
jonathankoren wrote: post #42

I don't understand this link. It's a trading quote, with no text and an irrelevant embedded video. A much better link would be something that talks about this close. For instance https://www.cbc.ca/news/business/chinese-yuan-falls-to-11-ye... I'm still confused by the coverage, since it's trading at 7 CNY to 1 USD. That's still higher than the 52 week low. Also it's higher on the chart on the right which shows the 5…

It's low in terms of the Yuan's purchase power vis a vis the US dollar. So the Chinese need more Yuan to buy the same products/services from the US. And in contrast, Americans need less US dollars to buy the same products/services from China.

I understand how exchange rates work. What I’m confused about is claim that this is an eleven year low.

The article claims an exchange rate of 7.0391 CNY to 1 USD is an eleven year low, yet the 52 week range is 6.6704, and the five year low is below 6.2976. Typically, these charts show closes rather than intraday ranges, which further ads confusion about the claim.

Re: Yuan falls to 11-year low

#52

Post by gamblor956 »

seanmcdirmid wrote: post #41
gamblor956 wrote: post #40

Earlier quoted context omitted.

China's currency controls actually made the problem worse--a lot of non-Chinese companies immediately backed off on Chinese investments (i.e., factories, etc.) as soon as the controls were introduced.

What do you mean? China has had currency controls for a very very long time. It doesn’t affect foreigners or foreign companies so much, they give us an easy out (we can exchange whatever we earn automatically).

I'm referring specifically to the capital-related currency controls.

A few years ago China clamped down on how much cash a person could send/take out of China or exchange for foreign currency.

It impacted a number of Chinese companies with operations in the U.S., especially Chinese real estate developers like Greenland, and basically eviscerated the EB5 visa market. I had a number of clients cancel deals because they couldn't get their money out of China.

Re: Yuan falls to 11-year low

#53

Post by Taniwha »

mdorazio wrote: post #49
Taniwha wrote: post #38

Earlier quoted context omitted.

I think the US continues to be buoyed by it's reserve currency status, if say oil started to be priced in euros the US might find itself with a currency like everyone else's and giant debts, the dollar would crash (which would be good for US exports)

The US gets a lot of flak for its high debt dollar amount, but realistically the more important metric is debt to GDP ratio, which is a decent indicator of a country's ability to sustain its debt. The US is somewhere around 105% currently, right around the same level as Belgium. For comparison, Japan is almost 250% - basically leveraged to its gills - but tends not to get the same level of bad press. The US should ce…

While it's not Japan its debt to GDP is still really really high compared with the rest of the world

https://www.theinvestorspodcast.com/blog/visualizing-the-sno...

(as I pointed out abive I agree that it would be good for exports)

Re: Yuan falls to 11-year low

#54

Post by seanmcdirmid »

gamblor956 wrote: post #52
seanmcdirmid wrote: post #41

Earlier quoted context omitted.

What do you mean? China has had currency controls for a very very long time. It doesn’t affect foreigners or foreign companies so much, they give us an easy out (we can exchange whatever we earn automatically).

I'm referring specifically to the capital-related currency controls. A few years ago China clamped down on how much cash a person could send/take out of China or exchange for foreign currency. It impacted a number of Chinese companies with operations in the U.S., especially Chinese real estate developers like Greenland, and basically eviscerated the EB5 visa market. I had a number of clients cancel deals because they…

Yes, they clamped down on Chinese quotas, but not foreigner quotas. Your comment:

> --a lot of non-Chinese companies immediately backed off on Chinese investments (i.e., factories, etc.)

That meant foreign companies on Chinese investments, not Chinese companies on foreign investments, right?

Re: Yuan falls to 11-year low

#55

Post by locust101 »

jonathankoren wrote: post #51
ccarpenterg wrote: post #46

Earlier quoted context omitted.

It's low in terms of the Yuan's purchase power vis a vis the US dollar. So the Chinese need more Yuan to buy the same products/services from the US. And in contrast, Americans need less US dollars to buy the same products/services from China.

I understand how exchange rates work. What I’m confused about is claim that this is an eleven year low. The article claims an exchange rate of 7.0391 CNY to 1 USD is an eleven year low, yet the 52 week range is 6.6704, and the five year low is below 6.2976. Typically, these charts show closes rather than intraday ranges, which further ads confusion about the claim.

Calling it lowest ever means that you can get more yuans than ever in 11 years for 1 dollar. If you look at the chart, it clearly shows that this is the maximum yuan amount you can get for 1 USD in at least 5 years.

Re: Yuan falls to 11-year low

#56

Post by sokoloff »

locust101 wrote: post #55
jonathankoren wrote: post #51

Earlier quoted context omitted.

I understand how exchange rates work. What I’m confused about is claim that this is an eleven year low. The article claims an exchange rate of 7.0391 CNY to 1 USD is an eleven year low, yet the 52 week range is 6.6704, and the five year low is below 6.2976. Typically, these charts show closes rather than intraday ranges, which further ads confusion about the claim.

Calling it lowest ever means that you can get more yuans than ever in 11 years for 1 dollar. If you look at the chart, it clearly shows that this is the maximum yuan amount you can get for 1 USD in at least 5 years.

Right. In other words, "the value of 1 yuan is the lowest in 11 years in terms of how many dollars it can buy..."

Re: Yuan falls to 11-year low

#57

Post by jussij »

chrisjc wrote: post #43
hourislate wrote: post #9

The Chinese are doing everything they can to make sure US tariffs don't affect US consumers. And discourage factory work to leave for other countries (Vietnam, Mexico, Taiwan, Thailand, etc).

Doesn't the increase in cost of supplying the money that Americans need to buy Chinese goods (buying TBonds) just offsetting making goods cheaper?

For many years the value of the Chinese exports to the USA have been much greater than it's USA imports.

This large trade surplus basically means China earns a lot of USD and it uses those US dollars to buy US T-Bonds.

So for T-Bonds the USD/Yaun exchange rate does not come into the picture.

But that low USD/Yaun exchange rate does help to keep Chinese exports cheap and that then helps to protect their trade surplus.

Re: Yuan falls to 11-year low

#58

Post by Gustomaximus »

nostromo wrote: post #28
joeyrideout wrote: post #15

Earlier quoted context omitted.

The ECB is negative and preparing to cut lower. BoJ is buying 90%+ of their own bond market. Emerging markets are blowing up routinely, most recently Argentina. Australia and Canada have their own issues. The U.S. isn't perfect but it's comparatively safe with a large military and reserve currency status with positive interest rates giving them room to react short term. (Edit: To be crystal clear, this relative safet…

The crazy thing is that the US is pricing its treasuries between Greece and Italy . In other words, the US could pay much less for debt if it wanted to. https://tradingeconomics.com/bonds No other developed country is paying anything near that amount. That is drawing a large inflow of capital into long-term treasuries, which in my view, is the true cause for the recent inversion.

We need to consider this 'the US could pay much less for debt' line that is recently being pushed.

This is appealing to simple thinkers as it's true on the surface. America pays less ..great. It suits Trump's short term planning agenda naturally. But it fails to recognise a key point. Central banks interest rates aren't priced to coumtries 'the best rates', of borrowing. They are about controlling monetary policy.

Sure every country could drop interest rates to rock bottom. But what happens if inflation drops. Or a recession is looming? At a national level you need to look at higher interest rates as 'growth in the bank' for the future. And in the same way you should keep savings on hand, a govt should keep interest rate movement available for when times are worse.

Further, central bank rates effect consumer rates. Not everyone is eyeballs deep in debt looking for cheaper lending. We have to acknowledge savers too. There was a time not so long ago where people put money into banks expecting to make a reasonable profit. It feels like savers are a forgotten group. It's not suitable for everyone to load their savings into the market and hope timing suits their withdrawal needs.

This post-2008 era is going to be really interesting to study in another 20 years or so when it's played out.

Re: Yuan falls to 11-year low

#59

Post by DuskStar »

seanmcdirmid wrote: post #54
gamblor956 wrote: post #52

Earlier quoted context omitted.

I'm referring specifically to the capital-related currency controls. A few years ago China clamped down on how much cash a person could send/take out of China or exchange for foreign currency. It impacted a number of Chinese companies with operations in the U.S., especially Chinese real estate developers like Greenland, and basically eviscerated the EB5 visa market. I had a number of clients cancel deals because they…

Yes, they clamped down on Chinese quotas, but not foreigner quotas. Your comment: > --a lot of non-Chinese companies immediately backed off on Chinese investments (i.e., factories, etc.) That meant foreign companies on Chinese investments, not Chinese companies on foreign investments, right?

Doesn't China require that a lot of ventures be majority owned by Chinese citizens? I could see that money ending up 'contaminated' and hard to pull back out of the country later.

Re: Yuan falls to 11-year low

#60

Post by cat199 »

PKop wrote: post #27
ianai wrote: post #20

Earlier quoted context omitted.

MMT disagrees with the entire premise of your comment. The “why is this happening” podcast has an excellent explanation.

I know they do. The IMF does not. Read the playbook that the Fed / Treasury are likely running [0] Consists of: 1: Regulate the bond market to be very illiquid 2: Touch off deflation scare to herd the masses into USTs & sovereigns while CBs buy gold 3: Implement aggressive version of MMT 4: Watch bond bulls burn in real terms after you've lit their "Hotel California" on fire (MMT, monetize debt, devalue $) MMT depend…

> It will give legitimacy to what would have been necessary anyways, and which was likely impossible politically to avoid given sluggish labor and wage growth after decades of equity bull run and growing inequality.

what would have been necessary anyway? I'm reading currency devaluation?

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