China Was A Currency Manipulator For A Few Months



Overview: The leaked US decision to lift the currency manipulator designation on China was the latest fodder fueling the new record highs in the S&P 500. The risk-taking appetite helped extend the rally in the MSCI Asia Pacific Index for the fourth consecutive session. Europe's Dow Jones Stoxx 600 is little changed and trying to snap a two-day decline. US shares appear directionless in the European morning. Benchmark yields are slightly softer in Europe and US Treasuries, with yesterday's rise lifted Asia Pacific yields today. Supply concerns appeared to have been a facto, raising EU yields, including the 10-year German Bund to eight-month highs (~-15bp). Meanwhile, UK rate adjustment continues, and the two-year yield is off around 20 bp in the past four sessions. The US dollar is firmer against most of the major and emerging market currencies today, but ranges are small, and the activity is subdued. The JP Morgan Emerging Market Currency Index is threatening to extend its decline for the fourth session. March WTI is hovering around unchanged levels as it straddles the $58 a barrel level. Gold continues to trade heavily though found some support near $1536, having peaked during the heightened US-Iran confrontation to about $1611.  

Asia Pacific

The markets hardly reacted when the US cited China as a currency manipulator five months ago. Word leaked out before the release of the Treasury report, which was due last October but was delayed ostensibly pending the US-China talks. Reports that it would not be cited as such in the Treasury's next report is supposed to be a significant event. It is not. Some observers link the yuan's strength, and it is at its highest level since last August to a quid pro quo. China manipulates strengthens its currency, and the US lifts the designation. It assumes Chinese officials gave the label any significance when the IMF itself refuted such claims. By citing a 1988 law instead of the congressional update of 2015, US Trump Administration effectively debased the threat and removed the stigma. Ultimately, it was seen as a political rather than an economic judgment. China, successfully snapped the near-magical significance investors and observers had given the CNY7.0 level. 

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Read more by Marc on his site Marc to Market.

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Alpha Stockman 1 year ago Member's comment

Only for a few months?