Russia-Economy: Russia ditches dollar, opts for euro and yuan

A report by the Bank of Russia published late on Wednesday (9 January) reveals that the country dumped $101 billion in US holdings from its reserves, shifting into euros and yuan last spring amid a new round of US sanctions.

According to Bloomberg who broke the news, the report reveals a dramatic acceleration in a policy Russia has been pursuing for several years of reducing exposure to assets that could be affected by US sanctions.

Read more: Russia ditches dollar, opts for euro and yuan – EURACTIV.com

Global Monetary System: The currency war intensifies after China devalues the yuan by Daleen Hassan

One week after the People’s Bank of China devalued the yuan Business Middle East focuses on reactions to the central bank’s latest action which was taken to support the country’s economy.

Reducing the value of the Chinese currency raised many questions and fears in a country considered one of the main engines of the global economy. The devaluation impacted on global stocks, commodities and currencies.

It is a known financial tactic that when the economy stumbles in a country, central banks intervene. For example, what happened with quantitative easing in the US, Japan and the eurozone. It is no different to what China did, so why did the devaluation of the yuan reverberate around the globe in the way it did?

China’s decision to reduce the value of its currency last Tuesday by two percent, led to the yuan falling to its lowest level in 20 years. That surprise was followed by the second on Wednesday to reduce it by 1.06% and on Thursday, there was a third reduction of 1.11%.

A combination of factors pushed Beijing to make this decision mainly, the latest losses in stock markets, especially the Shanghai composite index and recent data which showed exports fell by 8.3 percent in the month of July. The forecast for growth also showed a fall, dropping to less than 7 percent.

China’s currency over the past years was considered one of the most stable but the strong yuan put a lot of pressure on Chinese exports.

In one week following devaluation, the yuan depreciated against the global currencies basket. It fell against the dollar by 2.92% and 3.89% against the euro.

Read more: The currency war intensifies after China devalues the yuan | euronews, Business Middle East

Currency wars? China’s yuan drops for a third day

Another day and another chance for China’s central bank to lower the guiding rate for the yuan. It is the third consecutive time the bank has taken such action with its currency.

Thursday’s rate of 1 percent down against the dollar was a smaller margin than the shock cuts earlier this week and the bank announced there was no reason for it to fall further.

The weaker Yuan makes Chinese products cheaper abroad and the currency’s devaluation came in the light of figures showing exports had plunged over eight percent in July.

But has Beijing’s intervention created something of a Chinese puzzle allowing market forces to set the exchange rate but “guiding” the rate to a level to boost exports.

Officials response was to say the bank has stopped “regularly” intervening in the foreign exchange market but allowed it could conduct “effective management” of the yuan in extreme volatility.

US politicians have responded by accusing Beijing of unfairly supporting its exporters.

Read more: China’s yuan drops for a third day | euronews, economy

Chinese Economy: Theories abound on China’s rising yuan - by Andy Hoffman

The world’s second-largest economy is expected to grow at less than 8 per cent in 2012 – far below the average double-digit gains enjoyed in recent years. Other than a stabilizing real-estate market, China’s economic data has offered few solid reasons for bullish optimism and widespread fears of a “hard landing” for the Chinese economy persist.

So why the rise?

Some are pointing to the upcoming U.S. presidential election, and suggest the People’s Bank of China (PBOC) is intervening to goose the currency, commonly known as the yuan, to help President Barack Obama’s re-election efforts. Mr. Obama is regarded as less hawkish towards China while Republican candidate Mitt Romney has vowed, if elected, to brand the country as a currency manipulator.

Na Liu, the president and founder of CNC Asset Management Ltd., believes there are other considerations at work, namely an attempt ratchet up investor faith in the Chinese economy.
“Besides political considerations and the QE effects, I think the PBOC also wishes to shore up investors’ confidence. A stronger spot exchange rate for the yuan helps diminish the depreciation expectations for the Chinese currency and underpins investor confidence for the Chinese economy.

And in turn, it reduces people’s desire to hoard the U.S. dollars and makes people more willing to convert dollars into yuan. This mechanism helps increase the local money supply and boost domestic economic activities,” Mr. Liu said in an interview.

Read more: Theories abound on China’s rising yuan - The Globe and Mail

Bloomberg.com: Wen Says Yuan Pressure Unfair; Europe’s Lobbying Fails

For the complete report from Bloomberg.com click on this link

Chinese Premier Wen Jiabao rejected “unfair” calls for the yuan to appreciate and European leaders acknowledged that they had failed to shift the nation’s stance on its currency. “Some countries are now calling for yuan appreciation while imposing trade protectionism on China, which is unfair and actually limits China’s development,” Wen said at a briefing in the Chinese city of Nanjing today. In the financial crisis, “a stable yuan is helpful to the development of the Chinese economy and the world’s economic recovery,” he added. European officials indicated yesterday that they failed to convince China to loosen controls on the yuan that shelter Chinese exporters from the U.S. currency’s slide and make euro- region goods relatively less competitive. The euro has surged about 20 percent versus the dollar since Feb. 18, undermining the region’s recovery from the worst slump since World II. The yuan is effectively pegged to the dollar.

Quamnet.com: EU's Almunia says euro overvalued against Chinese yuan

For the complete report from the Quamnet.com News click on this link

EU's Almunia says euro overvalued against Chinese yuan

EU economic and financial affairs commissioner Joaquin Almunia said the euro is overvalued, while some currencies with an official exchange rate, such as the Chinese yuan, are undervalued. In an interview with the daily La Republica, Almunia said that there is also the risk that the dollar could further decline against the euro and called on the governments of the euro-zone to coordinate their stances.

"It is necessary that the euro zone finds a clear consensus and speaks with one voice at the next international meetings," with the G8 and IMF, he said.