RMB vs USD

[ameriken]

When I first met Jie last year, I think the RMB/USD was 8.5/1. When I first went to China at the end of June, it had dropped to 8.22/1.

Again, in Oct, it had become 8.11/1, and now, on this trip, the last time I changed bucks, it dropped below 8/1 to about 7.91/1.

 

Anyone hear any projections of RMB vs USD for the future? It's great for China, but our good ole Franklins are buying fewer and fewer Mao Ze Dong's.

 

Guesses anyone?

[Guest ShaQuaNew]

When I first met Jie last year, I think the RMB/USD was 8.5/1. When I first went to China at the end of June, it had dropped to 8.22/1.

Again, in Oct, it had become 8.11/1, and now, on this trip, the last time I changed bucks, it dropped below 8/1 to about 7.91/1.

 

Anyone hear any projections of RMB vs USD for the future? It's great for China, but our good ole Franklins are buying fewer and fewer Mao Ze Dong's.

 

Guesses anyone?

181793[/snapback]

Hmmm, not good news for my upcoming trip. I suspect the RMB will continue to get stronger....

 

http://www.gocurrency.com/cgi-bin/fxcmcalc...t=CNY&x=64&y=14

[frank1538]

http://www.x-rates.com/d/CNY/USD/graph120.png

 

The Chinese want to go very slow; the US wants a more rapid re-valuation. It's China's currency, so I suspect a continued but slow move. Many experts seem to think that a 15%-20% drop is the appropriate target re-valuation.

[ameriken]

http://www.x-rates.com/d/CNY/USD/graph120.png

 

The Chinese want to go very slow; the US wants a more rapid re-valuation.  It's China's currency, so I suspect a continued but slow move.  Many experts seem to think that a 15%-20% drop is the appropriate target re-valuation.

181839[/snapback]

Wouldnt that drop 6.5 to 7.0/1 range rmb/usd?

 

This is not helpful for my retire-in-China plan.

[frank1538]

Wouldnt that drop 6.5 to 7.0/1 range rmb/usd?

 

This is not helpful for my retire-in-China plan.

181841[/snapback]

Yeah, it wouldn't help unless 1) you are convinced that the drop will continue and 2) you are willing to convert dollars to yuan now. It ain't called currency "speculation" for nothing.

[pkfops]

I wouldn't worry too much about it.

 

The Chinese government isn't going to do anything

to slow the flow of the dollar or the yen into the country.

 

It is more plausible that the US will impose travel

restrictions to China on US citizens. Probably mask it

as an "anti terror" thing.

 

Maybe; just a paranoid thought.

Edited January 12, 2006 by pkfops (see edit history)

[JamesnYuHong]

Even at RMB6.4/$1, your retirement plans should be fine. Maybe get a 27-inch TV instead of a 32-inch.

[Dennis143]

The US Government had been pressuring China to allow their RMB to float in the free market, instead of being tied to the US Dollar, for quite some time. Well, last year China did what we asked and the RMB is finding its true value in the marketplace. The downside is China has been the financier of the US economy by sinking large amounts into US Treasure notes. And, as a result of the slide in the value of RMB, our Prime Interest Rate has increased proportionally.

[mercator]

It's all cyclical.

 

It all balances out. Europe was the past, USA is the present, and China may be the future (of course we thought the same about Japan).

 

The RMB float means that China supposedly will have to compete a little more evenly in the marketplace.

[BillV 8-16-2004]

The US Government had been pressuring China to allow their RMB to float in the free market, instead of being tied to the US Dollar, for quite some time.  Well, last year China did what we asked and the RMB is finding its true value in the marketplace.  The downside is China has been the financier of the US economy by sinking large amounts into US Treasure notes.  And, as a result of the slide in the value of RMB, our Prime Interest Rate has increased proportionally.

181991[/snapback]

My understanding is that China and Japan are largely purchasing our US Treasury Notes, which in turns keeps our interest rates low so that us here in America have more money in our wallets available to buy more Chinese goods. Recently I read that China is possibly thinking about selling off some of the Treasury Notes they have due to the high debt our country has incurred, and the strength of the dollar and looking at some other currency to buy. This in turn will cause our dollar to weaken and our interest rates to raise? Has anyone else hear of this?

Edited January 13, 2006 by BillV 8-16-2004 (see edit history)

[ameriken]

Even at RMB6.4/$1, your retirement plans should be fine. Maybe get a 27-inch TV instead of a 32-inch.

181986[/snapback]

Or more correctly, a 48 instead of a 60.

 

[frank1538]

My understanding is that China and Japan are largely purchasing our US Treasury Notes, which in turns keeps our interest rates low so that us here in America have more money in our wallets available to buy more Chinese goods. Recently I read that China is possibly thinking about selling off some of the Treasury Notes they have due to the high debt our country has incurred, and the strength of the dollar and looking at some other currency to buy. This in turn will cause our dollar to weaken and our interest rates to raise? Has anyone else hear of this?

182272[/snapback]

Here's an article that discusses some of the issues: http://www.thetrumpet.com/index.php?page=article&id=1712

 

I can't vouch for the accuracy, but...

 

"...This would have a two-pronged effect on the U.S. economy.

 

First, a falling dollar would increase the cost of imports, giving rise to inflation. Any goods manufactured in foreign countries, whose currencies are increasing in value versus the dollar, would become more expensive. This might make it especially tough on companies like Wal-Mart, which sell mostly foreign-produced goods.

 

Second, if the dollar falls too much, the Federal Reserve would be forced to raise short-term interest rates in an attempt to support it. A rising short-term interest rate could start to close the gap between the short-term and long-term bond yields, causing the yield curve to flatten or invert. In the past, an inverted yield curve (i.e. short-term interest rates being higher than long-term rates) has preceded every recession since the middle 1960s except for one (Economist, June 7)."

[Stone]

Here is a graph of current yield curve:

 

http://finance.yahoo.com/bonds/composite_bond_rates

 

Historically, long term rate was much higher than short term rate (i.e. 30 yr bonds have higher rate than 10 yr bonds, which in turn have higher rate than the 5 yr notes, the so called yield curve). However, you can see the yield curve is fairly flat now, after Fed has made 12 consecutive quarter-point increases in short term interest rate since June 2004. The long term interest rate surprisingly did not rise much, causing the flattening of the yield curve. Long term interest rate is not determined by Federal Reserve, it is determined by the market demands. As Asian countries continue to buy huge amount of U.S. Treasury bonds, long term rate only increased slightly, despite the sharp rise of short term rate.

 

Now if those Asian countries believe US dollar will decline or refuse to finance the U.S. budget deficit, they will sell long term U.S. Treasury bonds that they hold and/or buy into Euro denominated assets. In that case, the U.S. long term interest rate will rise, mortgage rate will also rise, eventually leading to a slowdown (or a drop) in the U.S. housing market. U.S. consumers will have to pay more to borrow (either credit cards, auto loans or mortgages), dampening economic growth. It won't be too bad, if they gradually and very slowly liquidate their U.S bond holdings. But if they suddenly sell a large chunk, then it will definitely send shock waves throughout the U.S. financial markets.

Edited January 14, 2006 by Stone (see edit history)

[skibum]

I waited until my personal economist got home from work. I discussed it with her and she feels that Chinese inflation is much more important a factor for retiring in China.

China does not like to mention inflation. I believe this is a result of the problems in 1989 when the general population joined the students in protests as a result of high inflation.

She added:

The reason the RMB is stronger now is that many people(countries) want to buy it but China is running out of RMB and doesn't want to print more and increase inflation. They sure don't want to sell dollars now as they will be getting much less than they paid. They will be paid in $ probably for the treasurys and then have to turn around and buy RMB on the open market.

Then there is the terrible condition of the Chinese banks. All in all, I would not speculate in RMB and neither would I worry about it, Just be glad you are not the person in charge of the Chinese treasury.

[esun41]

It is our goal to retire in China as well.

 

We should have enough saved to afford heat and air conditioning.

 

My opinion is that in 10 to 15 years, China will be one of the top economic powers if not the top!

 

There's a reason the Chinese government is buying all that concrete and building supplies!

 

The trade deficit is a hot topic as well.

 

Time to wake up America!!!