China’s central bank continues to stock up on gold

Just as his remark about the female journalist is distasteful, his comment about the devalued Chinese currency is extravagant.

The ensuing “Super Dollar” period that began when Federal Reserve Chairman Paul Volcker raised benchmark interest rates to fight inflation also contributed to sharp moves in U.S. financial markets.

For importers from China like Target, Walmart and Home Depot, both reporting next week, the tailwind is expected to be offset by the expectation of a slower global economic growth, according to Michael Yoshikami, CEO of Destination Wealth Management in Walnut Creek, California. Instituting a managed float now would arguably provide three months of data to support China’s argument that it is serious about adopting a more freely usable currency. This also removes a shroud of uncertainty that was hanging over the wider European economy. Frightened Chinese language have been shifting cash in another country, placing downward strain on the yuan.

Some analysts say the devaluation could speed the spread of low-cost Chinese smartphones overseas. “We have confidence in the future of the market in the long-term, and will monitor the impact of the likes of currency devaluation”. It has to maintain that rate of growth. Currency markets may likewise demonstrate Beijing’s impotence. If that is the case, and China reduces demand for commodities, a number of countries in Latin America will suffer.

Oil prices down near six-year lows also bit into the markets of the region’s export-reliant economies. Mexico would also be adversely affected; though in a different way.

One way to think about the recent financial turmoil in China is as a parenting dispute between “Xi Dada” and “Yang Ma” – meaning “Big Daddy Xi” (the nickname for President Xi Jinping) and “Big Mama” (a popular moniker for the People’s Bank of China). In such a system, the currency “appreciates” when its price goes up in terms of other currencies; it “depreciates” when that value falls for people or banks who exchange it for other currencies.

China wants investors and traders to adjust to the idea that it is increasing its currency exchange rate fluctuation.

– Wellington gained 0.54 percent, or 30.97 points, to 5,727.42. And the Chinese economy still needs more support. Instead of obtaining revenues from exports, they could come from investors.

The austerity measures that have already hit sales of Scotch in China are aimed at cleaning up corruption in Communist Party, and have dramatically cut back on the local custom of giving expensive gifts to well-connected officials. Its foreign exchange reserves stand at US$ 3.7 trillion. That is, Chinese leaders have effectively set a floor on how far the renminbi can fall.

In order to cater to the inevitable growth in demand for the yuan, China’s central government has in recent times appointed a grand total of no fewer than 15 clearing banks worldwide outside of the Chinese mainland to accommodate the rapidly rising popularity of its currency. And, no less an authoritative financial agency than the worldwide Monetary Fund (IMF) has nodded its approval of the devaluation. As part of the process, China has requested to be included in the basket of “Special Drawing Rights” (SDR) currencies. These include pound sterling, Japanese yen, US dollar and euro.

While Monday’s stronger yuan fixing led some Asian currencies to strengthen earlier, many started to weaken later in the afternoon.

If I were a betting person, my money would be on China achieving its objective.

China launched its biggest devaluation of the yuan in 20 years on Tuesday with the country’s central bank putting the yuan’s central rate at 6.4010 yuan for $1, a drop of 1.11 percent from the previous day’s 6.3306.

Whatever the real reason behind the decision in Beijing to devalue the yuan, what is needed worldwide is adjustment to its reality.