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I always wondered why Asian countries, unlike the West rarely complain about “unfair advantage” that China receives from the weak yuan, Fannie V. Kumar wrote in a commentary on MarketWatch.
Eventually they also have something to lose from the undervalued Chinese currency – on the one hand, they compete with China for export worldwide, and many other neighboring countries rely on it as the largest trading partner.
Perhaps one reason is that they do not influence the U.S. or the European Union in terms of Asian economic superpower. Another might be that many of them very regularly intervene in currency markets over a period of time and this fact deprives them at least part of the moral foundations for such criticism.
However, may be a third reason – although Asian currencies outperform yuan during periods of boom in the economy, they in fact perform worse than the Chinese currency during periods of decline.
I always wondered why Asian countries, unlike the West rarely complain about “unfair advantage” that China receives from the weak yuan, Fannie V. Kumar wrote in a commentary on MarketWatch.
Eventually they also have something to lose from the undervalued Chinese currency – on the one hand, they compete with China for export worldwide, and many other neighboring countries rely on it as the largest trading partner.
Perhaps one reason is that they do not influence the U.S. or the European Union in terms of Asian economic superpower. Another might be that many of them very regularly intervene in currency markets over a period of time and this fact deprives them at least part of the moral foundations for such criticism.
However, may be a third reason – although Asian currencies outperform yuan during periods of boom in the economy, they in fact perform worse than the Chinese currency during periods of decline.
To some extent yuan appear to be a specific Asian currencies such as “safe haven” rose against the rest of the continent during periods of market stress and decline in the rest of the time – just like the dollar.
Here are some data to support this assertion. So far in May, the dollar has appreciated 1.5 percent against the yuan, quite low compared with growth of 5.2 percent of the dollar index Intercontinental Exchange (ICE).
The only exception to the trend is the Japanese yen, which has now dropped by 1.3 percent against the dollar since the beginning of the month.