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
July 25, 2006
What The Dollar Bears Have Been Waiting For
China should increasingly diversify its foreign-exchange reserves to reduce the risk of losses from declines in the dollar, the country's National Bureau of Statistics said...
"The U.S. dollar may continue to weaken, increasing the risks of foreign-exchange losses in our currency reserves,'' the statement said. Speculation that the dollar will fall "also boosts expectations that the yuan will strengthen.'' The bureau didn't provide reasons why it expects the dollar to fall.
Well, beyond the obvious fact that the U.S. current account deficit is pretty large, there are the reasons included in the update in this post. And, of course, there are the simple facts on the ground. From Brad Setser:
Floyd Norris of the New York Times highlights something that was also on my radar screen: a sharp fall off in foreign demand for US treasury bonds. For the first time in years, the US budget deficit is being financed by domestic investors.
Foreign inflows to the US haven’t fallen off, to be sure. But the composition of these inflows has changed. Foreigners are buying more agencies and US corporate debt and fewer Treasuries. First quarter data is here; the TIC data from April and May do not indicate that the story has changed.
And (again from the Bloomberg article):
"Diversification is a continuation of China's reserves management,'' Standard Chartered's Hui said. "There's evidence or suggestions China has been moving gradually away from U.S. dollars into other major currencies, such as the yen or euro.''
There are, of course, the not atypical mixed messages:
[China] should also encourage Chinese companies to invest abroad to curb expectations of a stronger yuan, the bureau today said in a statement on its Web site...
Today's statement came a day after China said it may allow its brokerages to raise hard-currency assets and invest them overseas for the first time As part of the central bank's efforts to encourage capital outflows and reduce pressure on the yuan to rise.
That should give you pause, but if you are looking for a fearless prediction, here it is:
Fund outflows "will be gradually increasing, but they probably won't have an immediate effect in reducing the upside pressure of the yuan,'' [Tai Hui, an economist at Standard Chartered Bank in Hong Kong] said. The Chinese currency may strengthen 3.8 percent to 7.80 to the dollar by the end of this year, he said.
Even at the lower end of that range, I'd declare Nouriel Roubini's 5-percent prediction a winner.
TrackBack URL for this entry:
Listed below are links to blogs that reference What The Dollar Bears Have Been Waiting For:
- Is Wage Growth Accelerating?
- Unemployment Risk and Unions
- Cumulative U.S. Trade Deficits Resulting in Net Profits for the U.S. (and Net Losses for China)
- The Slump in Undocumented Immigration to the United States
- A Quick Pay Check: Wage Growth of Full-Time and Part-Time Workers
- Back to the '80s, Courtesy of the Wage Growth Tracker
- Introducing the Atlanta Fed's Taylor Rule Utility
- Payroll Employment Growth: Strong Enough?
- Forecasting Loan Losses for Stress Tests
- Men at Work: Are We Seeing a Turnaround in Male Labor Force Participation?
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 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