Currencies

THE Chinese yuan has picked up the pace over the past couple of months, rising at an annual rate of almost 7% against the American dollar since September four times as fast as over the previous 14 months since it broke its link with the dollar. Ifthis continues, the yuan could soon be worth more than China's second currency, the Hong Kong dollar, which is still firmly pegged to the greenback.On November 13th the yuan hit a new high of 7.864 to the dollar, putting it within a whisker of the Hong Kong dollar's trading band of HK$7.75-7.85 against its ... [full story]

WHICH country has the world's most undervalued currency? Most people would answer China. Yet by many measures the Japanese yen is now cheaper than the Chinese yuan. It cannot be long before America and Europe put Japan in the dock, alongside China, and accuse it of keeping its currency unfairly low.Until this year the yen's weakness was easy to explain: since 2001 the Bank of Japan (BoJ) had been printing loads of money in order to defeat deflation. An increased supply of yen relative to that of other currencies pushed down its price. But the yen's softness this year is ... [full story]

Volatility, of sorts, creeps into the yuan-dollar exchange rate IF THE euro, say, rises by 0.2% against the dollar, yen or Swiss franc one day and falls by almost as much the next, no one pays much attention. But such oscillations in the value of the yuan against the dollar are rare. The Chinese currency's 0.28% fall on August 15th was its biggest in a day since China revalued the yuan in July 2005. The next day it gained 0.24% at one point, before closing 0.16% up; only three times has it risen by more in a day.These jumps have ... [full story]

WITH political unrest dominating the headlines in Thailand, the Philippines, Indonesia and, unusually, in Malaysia, which has had street protests against fuel-price rises, you might expect South-East Asia's currencies to be drooping. In fact, they have been rather strong (though they wobbled this week after America's Federal Reserve raised its interest rates). Speculation that China might let the yuan rise faster is one reason. Others include inflows of money from rich-country investors seeking high returns; and signs that, despite the political noise, the region's governments are running their finances well, in particular by cutting fuel subsidies.The gains in the region's ... [full story]

AMERICA'S profligacy is now taken so much for granted that an enormous increase in its current-account deficit no longer makes front- page news. In the fourth quarter the deficit jumped to a record $225 billion, or 7% of GDP, lifting the deficit for 2005 as a whole to $805 billion. It has become fashionable in America to argue that the deficit does not matter in particular, that it will not drive the dollar down. But fashions can quickly change.The deficit is likely to hit an annual rate of $1 trillion before the end of this year. Economists at ABN AMRO ... [full story]

FOR Bill Gates, Warren Buffett and many Wall Street number-crunchers, the dollar supplied one of the nastiest surprises of 2005. The world's two richest men and most financial-market seers predicted that the greenback would fall last year, dragged down by America's colossal current-account deficit. Many forecasters were predicting that the euro would buy $1.40-odd by now and that a dollar would fetch less than¥100.They were all wrong. Although America's current-account deficit headed towards $800 billion in 2005, the dollar rose. It was up by 3.5% against a broad trade-weighted basket of currencies, the first rise in four years(see chart). Against ... [full story]