Finally, here is the Treasury report on international exchange rate policies.
Originally, the document had been scheduled to be released in mid-April, but it was delayed by the US government as it attempted to negotiate an appreciation in the renminbi while holding off mounting pressure to punish the Chinese from infuriated members of Congress.
As expected, the US is once again not naming China a currency “manipulator”, but only stating that its currency is “undervalued”. That outcome was a foregone conclusion since June 19, when China depegged from renminbi from the dollar, the first step towards appreciation.
In a statement yesterday, Tim Geithner, US treasury secretary, was cautious about the implications of the move. “What matters is how far and how fast the renminbi appreciates,” he said. Read more
Lesson #1 for all politicians taking office: be careful what you say about currencies. (Actually, maybe lesson #1 should be: don’t say anything about currencies).
Japan’s prime minister, Yukio Hatoyama, caused a fuss today by saying that the yen is too strong, but put into context his remarks don’t add up to much.
From the FT:
“The recent strength of the yen does not necessarily reflect the strength of the Japanese economy and its industries,” Mr Hatoyama told a Diet committee.
An official at the ruling Democratic party said Mr Hatoyama told the committee that the exchange rate should be left to the markets, except in cases where there were sudden moves in the market that did not reflect the fundamental value of the currency.
Mr Hatoyama was responding to a question from the opposition Liberal Democratic party. The official stressed that the prime minister was not suggesting the need for an immediate policy response because the yen has not been particularly volatile recently.
All of which suggests that exchange rate intervention is not likely and nor would it be particularly justified, as the Bank of Japan’s real, trade-weighted exchange rate index indicates. Read more