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Obama's Yuan Calls May Cause Collision With China
Nov 25 15:38 pm
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All Comments by random2348 »Is It Time to Short Bonds? [View article]
www.bloomberg.com/apps...
"Obama said China must stop manipulating the currency in a letter to the National Council of Textile Organizations released on Oct. 24. The People's Bank of China has kept the yuan almost unchanged against the dollar since mid-July as it shifts focus from countering inflation to sustaining growth amid a global credit crisis. The Foreign Ministry said last week the U.S. shouldn't blame its trade deficit on exchange rates."
There could be a trade war with China. American manufacturing has been demolished by China and the yuan peg will be an attractive target for Obama. How can American manufacturers compete with a foreign competitor who keeps its currency artificially weak? (Some people may dispute that the yuan is being kept artificially weak. Well, why not let it float and let's see where it ends up?) I don't expect China to dump Treasuries even if there is a trade war, but I think it might curtail its purchases somewhat.