Though the Chinese currency has dropped substantially against the U.S. dollar, it hasn’t depreciated against other currencies, and hence, Chinese authorities have started framing discussions in terms of trade-weighted effective exchange rates rather than solely looking at the USD/CNY trade.
Richard Koo of Nomura points out in his Jan. 13 research note titled: “New year ushers in global market turmoil” that the markets and the Federal Reserve are at odds on the expected pace of rate hikes.
CNY remains strong on EER basis
Koo points out that thanks to the dollar’s appreciation against almost every other major currency since the Fed began talking about normalizing monetary policy in the autumn of 2014, the Chinese currency continues to trade at elevated levels. As captured in the...
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