Tuesday, April 17, 2018

China's yuan up 11% since President Trump took office

Marginal Revolution reports:

“China’s yuan has appreciated vs. US dollar by +3.7% so far this year, and has risen +10.7% since Trump took office. – US dollar has fallen by about -1% so far this year, on a broad trade-weighted basis.” Link here.

Two ways of explaining this:

  1. China is exporting fewer goods and services [to buy Chinese goods and services, US consumers or the importers that bring the goods to the country need to sell dollars to buy yuan==>demand for yuan increases]
  2. China is investing less in the US, i.e., holding fewer Treasury Bills [to invest in the US, Chinese investors need to sell yuan to buy dollars==> supply of yuan falls]

I suspect both may be going on.

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