The yuan is sliding against the dollar. What about against other currencies?
Among the many promises made by President Elect Trump, one was to declare China a currency manipulator on his first day in office. Besides the logistical difficulties of doing so without a Treasury Secretary in place, there are the minor difficulties of what the data indicate (I know, I know, facts seem of little import these days, but what the heck). In addition to the legally defined concerns Brad Setser has raised, I think it is useful to assess China’s currency using a commonly used measure of currency misalignment.
Last week I puzzled over the response of financial markets to the U.S. election. Since the election, the S&P500 is now up 3%, the dollar is up 4.6% against the euro, and most remarkable of all, the 10-year Treasury rate has gone up 50 basis points. Here I offer some further thoughts on the last development.
I was astounded not only by the outcome of the U.S. presidential election but also by the response of financial markets.
In short: Rural areas will not like what they get from a combination of expansionary fiscal/counter-cyclical monetary policy.
Figure 1: Daily economic policy uncertainty (blue), and centered 7 day moving average (red). Source: PolicyUncertainty, accessed 14 Nov 2016, and author’s calculations.
Today’s value (sure to be revised) exceeds that recorded on 9/18/2001, the previous high in the sample running from 1985 to today.