FYI | Feb 25 2009
By Rudi Filapek-Vandyck
With protectionism the ultimate faul word, but never too far away in an overall environment of falling growth and rising unemployment, politicians across the five continents will be monitoring very closely what is happening in China these days.
That doesn’t only include what stimulus packages the Chinese put in place, or which companies they are looking to buy, but equally so what is happening with the Chinese currency.
So too are investors. The chart below, courtesy of CIBC World Markets, clearly suggests Chinese authorities are using the USD peg of the renminbi to support their exporters in these difficult times. This is probably why Timothy Geithner stepped into his new role as Secretary of the US Treasury with a clear reference to “currency manipulation”.
It is clear the trend of a gradually appreciating Chinese currency has come to a halt, at least for now. What follows next remains anybody’s guess. (But fear the worst from the moment this chart starts moving upwards).
