The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.
- BLS Handbook of Methods
- Bureau of Economic Analysis
- Bureau of Labor Statistics
- Congressional Budget Office
- Economic Data - FRED® II, St. Louis Fed
- Office of Management and Budget
- Statistics: Releases and Historical Data, Board of Governors
- U.S. Census Bureau Economic Programs
- White House Economic Statistics Briefing Room
November 25, 2005
Yuan Appreciation Watch
From this morning's Wall Street Journal Online (subscription required):
China's central bank on Friday executed a deal in the domestic foreign-exchange market in what traders interpreted as a signal that a mild appreciation in its currency will be tolerated over the next year.
The People's Bank of China's "swap" with state banks allows it to buy $6 billion in 12 months at an exchange rate of 7.85 yuan. To make the deal attractive for the central bank, the yuan would need to rise at least 2.9% from current levels, not including interest. Traders said the central bank could therefore be trying to telegraph its expectations that the yuan will edge higher over the coming year.
The swap transaction was the first ever conducted by China's central bank and marks the latest advancement in the system's market orientation. More swaps could follow in the next few weeks and provide further clues of the central bank's thinking.
Here is the "however" part:
While Friday's swap transaction could signal there will be more flexibility in the currency in coming months, traders also said the central bank just as easily could have been trying to temper enthusiasm for a stronger yuan. Before the swap with what Dow Jones Newswires said were 10 banks, foreign exchange derivatives markets were already pricing in expectations the yuan would rise about 4% versus the U.S. dollar over the course of the year. Other non-deliverable forward derivatives contracts traded in Singapore and elsewhere outside China quickly matched the narrow appreciation level suggested by the swap transaction.
Meanwhile the evolution of the financial markets continues:
In another move that suggested China intends to introduce additional flexibility into the currency-exchange-rate system, the central bank said late Thursday it will tap market makers for dollar-yuan trading in 2006.
A market maker system could be a step toward relaxing the direct control China's central bank maintains over the yuan's value. Analysts say active participation by market-making firms could eventually replace the buying and selling of yuan often attributed to the People's Bank of China. Still, until China's yuan is fully convertible, the central bank would be expected to retain indirect control over the currency exchange rate by requiring qualified markets to follow certain instructions that would limit foreign-exchange volatility.
TrackBack URL for this entry:
Listed below are links to blogs that reference Yuan Appreciation Watch :
Daily linklets 28th November
A bumper Monday edition: Hong Kongs smog claims the Kitty Hawk. Nude chat is almost not illegal in China. The general fallacy in Western analysis of China. Can Bush solve Chinas Yasukuni problem? Maybe its Japans Yasukuni problem. I... [Read More]
Tracked on Nov 28, 2005 2:31:50 AM
Why the RMB USD swap is set at 7.85
So let's try to understand whether it is fair deal to the banks, or if not who is going to be benefited if RMB appreciates (or depreciates). [Read More]
Tracked on Nov 29, 2005 4:28:39 PM
- When Health Insurance and Its Financial Cushion Disappear
- What Is the "Right" Policy Rate?
- Is Poor Health Hindering Economic Growth?
- Behind the Increase in Prime-Age Labor Force Participation
- An Update on Labor Force Participation
- Another Look at the Wage Growth Tracker's Cyclicality
- GDPNow's Second Quarter Forecast: Is It Too High?
- Are Small Loans Hard to Find? Evidence from the Federal Reserve Banks' Small Business Survey
- Slide into the Economic Driver's Seat with the Labor Market Sliders
- The Fed’s Inflation Goal: What Does the Public Know?
- September 2017
- August 2017
- July 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- Business Cycles
- Business Inflation Expectations
- Capital and Investment
- Capital Markets
- Data Releases
- Economic conditions
- Economic Growth and Development
- Exchange Rates and the Dollar
- Fed Funds Futures
- Federal Debt and Deficits
- Federal Reserve and Monetary Policy
- Financial System
- Fiscal Policy
- Health Care
- Inflation Expectations
- Interest Rates
- Labor Markets
- Latin America/South America
- Monetary Policy
- Money Markets
- Real Estate
- Saving, Capital, and Investment
- Small Business
- Social Security
- This, That, and the Other
- Trade Deficit
- Wage Growth