Reading the financial press, various economic blogs and watching CNBC clearly leaves the impression that the current weakness in the dollar is having such a massive adverse impact on the holding of the Peoples Bank of China ( the Chinese central bank) that they are very seriously considering selling their dollar holdings and shifting into alternative reserve assets.
Given all that I’ve been reading and hearing I thought it would be informative for people to see what is actually happening to the Yuan-Dollar exchange rate.
That’s right. The Yuan is pegged to the dollar and has not changed one cent this year. Because the dollar has weakened this means that the yuan has weakened against the Euro and Yen, but the change is not out of line with other swings over the past decade. This means that Chinese exports have become more competitive in Japan and Europe, a highly desirable result from the
perspective of the Peoples Bank of China..
Actually, given the rally in the US bond market so far this year the Peoples Bank of China has actually experienced a very significant increase in the value of its holdings of US financial assets so far this year.
Makes one wonder about the value of so much of the information provided by the press, CNBC and economic blogs.