A few days ago I wrote that the recent currency move was smoke and mirrors. Many commentators wrote that it was just the first step of many, and I said that was rubbish.
Well, at least in the short term, I seem to have been right (sadly).
From the Washington Post China Downplays Further Currency Moves:
China’s central bank on Tuesday declared that last week’s slight increase in the value of the country’s currency, the yuan, was a one-time event and not the beginning of a gradual climb, as officials sought to diminish speculative pressures for a substantial revaluation.
In a written statement, the People’s Bank of China said the change to the country’s currency regime was primarily aimed at altering how it sets the exchange rate for the yuan — also known as the renminbi — by severing its direct link to the U.S. dollar, and not a signal of any willingness to allow its value to float upward.
And then, with amazing cheek, the people’s bank says:
“Certain foreign media has misled the public and even wrongly speculated that the revaluation of the renminbi by two percent was only the first step in a series of adjustments,” the bank declared, adding that its action last week “does not in the least imply an initial move which warrants further actions in the future.”
Well, thank heavens I wasn’t part of the “misleading media”!
Later in the article, it says:
“Simply put, we don’t see any effect whatsoever of a two percent revaluation on exports or imports,” said Jonathan Anderson, chief economist at UBS Investment Research in Hong Kong in a recent note to investors. Anderson, who has been among the more accurate China-watchers in recent months, added that it was “hard to see any effect at all” on U.S. consumers and manufacturers, or on China’s rate of economic growth.
Even a larger shift in the value of the yuan would likely have little impact on U.S. manufacturers, because most of China’s export growth is in products that have not been made in the United States in large scale in many years. Chinese workers who once earned $1 an hour will now make $1.02 — hardly an equation that will prompt American factories to dive back into the labor-intensive work of making toys, T-shirts and furniture.
Not to crow or anything, but it sure sounds like what I said at the time, doesn’t it …