Category Archives: Currencies

Oil Prices, Dollar Versus Other Currencies

This chart, courtesy Menzie Chinn at Econbrowser, says a lot: SDR is Special Drawing Rights,. Note the dollar is 44% of an SDR.

Morgan Stanley on Role of Subsidies in Oil Prices

A reader forwarded me a Morgan Stanley fixed income research report wrap, which included a discussion of the role of gasoline and oil price subsidies in certain developing countries. The price gives an good overview of the role these defacto consumer price discounts have played, and argues that they will have to be cut back […]

Scary Bad Hot Money Influx Into China

I’ve tried to have more dignified labels for recurrent phenomena, but I keep defaulting to “scary bad” when I get updates on China. The latest is that Michael Pettis does his usual workmanlike job of trying to make sense of China’s generally incomplete reporting on its funds flows. While one suspects the gaps are in […]

High Euro Leading to Fall in Long-Term Investment

Policymakers in Europe have been worried about the appreciation of the euro, which makes local goods less competitive in international markets. Another cost of the currency’s strength is that foreign direct investment has plummeted, as producers shift funds to nations that now have a cost advantage. From the Telegraph: Long-term private investors are pulling their […]

Is the Dollar Rally a Head Fake?

The dollar rose today, and gold has fallen below $900 as f this writing due to revisions in the first quarter GDP release that increased growth from “anemic” to “slightly less anemic”. Note that there was considerable skepticism about the initial 0.6% GDP growth figure (the revised level is 0.9%) because the total was entirely […]

Scary Bad Increase in Chinese Foreign Currency Reserves

In general, I’m not terribly fond of imprecise and emotion-laden terms such as “scary bad”. However, in this case, the more accurate description might be “mind-numbingly awful, pointing to increased financial instability.” Michael Pettis gives us a very thorough report on the stunning and mystifying report from China that its FX reserves increased by $75.4 […]

Lagarde Calls for ECB Rate Cuts to Stem Protectionism

It’s hard to read the tea leaves of the European Union at such a remove, but a public show of disagreement, even if done politely, is not an everyday spectacle. Frances’ finance minister Christine Lagarde urged central bankers to alleviate currency misalignment. This is mainly code for “do something about the pricey euro” but is […]

Is the Dollar Bounce Over?

The strong continued rise in commodities, particularly the recovery in gold, suggests not only worries about inflation, but the dollar as well. And a dollar reversion appears to be underway. For the last year, if not longer, rallies in the yen have been a sign of investors shedding risk and unwinding carry trades. Yet the […]

US-China Co-Dependent Behavior Worsens

Alliance: When two thieves have their hands so deeply plunged into each others’ pockets that they cannot separately plunder a third party. Ambrose Bierce, The Devil’s Dictionary The US and China bicker like an unhappily married couple, but Brad Setser warns us that the squabbling is getting nastier. And worse, both parties seem to fail […]

Debasing the Dollar Will Accelerate America’s Decline

We’ve said before that the US is in the same position as Thailand and Indonesia circa 1996, except we have the reserve currency and nukes. Some prominent commentators are making more polite observations along these lines. An article, “A rising euro threatens US dominance” in the Financial Times, by Benn Steil, director of international economics […]

Tim Duy: Fed Has Head in the Sand on Inflation and the Dollar

Tim Duy, posting at Economist’s View, is disturbed that the Fed isn’t giving much weight to rising inflation in its monetary calculus. Duy, a Fedwatcher, more than once underestimated the central bank’s interest rate cuts because it was inconceivable to him that anyone who read the data could think that repeated aggressive cuts were warranted. […]

Quelle Surprise! Markets Skeptical of G7 Efforts to Talk Up Dollar

An article in Bloomberg notes that despite the dollar bounce against the euro (the move against the yen can be characterized as noise), the Group of Seven will probably need to take “concrete steps” to support the currency. And those aren’t coming any time soon. As the piece notes, the ECB is still concerned about […]

More on the Jump in China’s Reserves

We commented the other day on the surprisingly large jump in China’s foreign currency reserves, noting that the monthly gain wa the biggest on record, when an appreciating yuan ought to put the growth in reverse (although one must note that the yuan hasn’t gained much if any ground relative to non-dollar currencies). I’m following […]

China’s Foreign Reserve Increases Accelerate Despite Yuan Appreciation

In a very bad bit of news for the US, the Los Angeles Times (hat tip Lune) reports that the Chinese policy of letting the yuan appreciate has not succeeded in reducing the country’s massive increases in foreign reserves. In fact, the situation is getting worse rather than better. Normally, when a country’s currency appreciates, […]

"Has the Moment Come to Replace the US Dollar?"

A crisp, lively piece by Kenneth Rogoff on the prospects for the US dollar does a nice job of synthesizing many of the relevant issues. Rogoff says quite bluntly that the US has gotten away with simply dreadful policies for a very long time, and even though the dollar hegemony is coming under considerable strain, […]