USA Delays Issuing A Treasury Report On The Chinese Currency

By: Mike Campbell

One of the first things I did when I started to write these articles last September was to compile a spreadsheet that charted both the movements of the major stock markets and the ups and downs of the world’s major currencies. This data is used to help compile the weekly, monthly and quarterly reviews of the markets and Forex rates. One major currency that I don’t report (but do track) is the Chinese Yuan; after all, China is the third largest economy in the world and recently overtook Germany as the world’s leading exporter. The reason for this strange omission on my part is that any analysis of the data leads to the inescapable conclusion that the Yuan is pegged to the Dollar (unofficially, of course). The Yuan has sat at 6.278 to the Dollar with a relative standard deviation (spread, if you like) of 0.03% since September 2009, despite all the turmoil that the Dollar has experienced in this time. In other words, the Chinese have decided to maintain a specific value against the Dollar come what may.

So, it comes as a surprise that the US Treasury is delaying a report which will analyse whether or not the Chinese are manipulating the value of their currency by several months. The report will be issued after a number of top-level international meetings. The Americans have long accused China of currency manipulation, but putting it in writing is, perhaps a different matter. Such a report could trigger US sanctions against China or trigger a trade war; neither of which would help the fragile US recovery right now.