Someone apparently forgot to tell the Chinese. The Wall Street Journal reported today, "China Nudges Yuan to 7-Month Low," pushed lower by China's central bank to boost growth.
The People's Bank of China set the morning reference rate--which typically sets the daily direction--weaker, with traders in Asia then pushing the yuan down to 6.2537 to the dollar, the closest it's ever been to the weak side of its 2% daily trading band.
A weaker currency should help ease two concerns confronting the world's second biggest economy: weakening exports and softening inflation.
Chinese is reported;y growing at it slowest in almost 25 years, not something that a country with a billion potentially restless people favors. With falling inflation numbers, the fear about deflation spreads and like a room full of measles apparently doesn't discriminate.
The drop on the yuan engineered by the People's is the latest response to persistent global economic weakness that is a legacy of the global financial crisis.
Many central banks have resorted to letting their currencies fall against their trading partners. In the short term, weakening a currency helps exporters by making their goods more competitive in foreign markets.
This is an economic replica of a once popular card game some played growing up called Old Maid. The object was not to get stuck holding the Old Maid card at the end of the game. With Japan already at the table--not to mention other central banks--and the ECB now pulling up a chair, the picture should be getting clearer.
With the U.S. economy being held up as the big recipient of all the Fed's QE and the big dollar rally, one should by now have a decent idea about who the Old Maid is.
The skeptics tell whoppers.
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