currency exchange

Obama Administration Refuses To Call Out China on Currency Manipulation Yet Again

Once again the Obama administration refuses to label China a currency manipulator. This is when the U.S.-China trade deficit looks on target to hit $300 billion and China just slapped the United States with a unjustified 22% additional tariff on American SUVs.

In the U.S. Treasury's Semi-Annual Report to Congress on International Economic and Exchange Rate Policies, team Geithner and the Obama administration literally refuse to label China a currency manipulator in spite of overwhelming evidence.

The Report highlights the need for greater exchange rate flexibility, most notably by China, but also in other major economies. Based on the ongoing appreciation of the RMB against the dollar since June 2010, the decline in China's current account surplus, and China's official commitments at the G-20, APEC, and the U.S.-China Strategic and Economic Dialogue (S&ED) that it will move more rapidly toward exchange rate flexibility, Treasury has concluded that the standards identified in Section 3004 of the Act during the period covered in this Report have not been met with respect to China. Nonetheless, the movement of the RMB to date is insufficient. Treasury will closely monitor the pace of RMB appreciation and press for policy changes that yield greater exchange rate flexibility, a level playing field, and a sustained shift to domestic demand-led growth.

Japanese Stop Currency Speculation, Not Really

Japan intervened in their foreign exchange rates after the yen hit a post WWII high against the dollar.

The dollar spiked after the intervention as much as 4 percent past 79 yen from around 75.65 yen. The dollar touched a record low of 75.31 yen earlier on Monday.

Finance Minister Jun Azumi said Tokyo stepped into the market for the second time in less than three months on its own at 10:25 a.m. local time (0125 GMT) and would continue to intervene until it was satisfied with the results.

The Yen is considered safe haven and there have been other recent interventions:

Monday’s maneuver was the fourth time in just over a year that Japan has intervened to stem the yen’s rise.

The BBC reports the Yen dropped 5% to the dollar after the move. One must wonder why is such speculation going on with the Yen, which is considered save haven. It seems in spite of the big Greek debt haircut and U.S. Q3 GDP of 2.5%., markets are leery and believe little has be resolved.

It seems speculators are ganging up on the yen in spite of Japan's quantitative easing:

China Helped to Create Conditions for Global Financial Meltdown - Moritz Schularick

According to Moritz Schularick:

Emerging markets, most notably China, helped to create the macroeconomic backdrop for the current financial crisis by subsidising interest rates and consumption in the US.

Even worse, the reason they did so was in reaction to contagion, a very nasty by-product of globalization as well to avert the 1997 Asian financial crisis.