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A Tale of Two Currencies
The U.S. Dollar rallied and the Chinese Yuan tanked this week.
As the dollar rallied this week, economists took turns vacillating between celebrating the return of the U.S. dollar and lamenting its perpetual futures as usual.
“The U.S. dollar strikes back,” celebrated Market Watch Editor William Watts unashamedly on August 31, 2023, before the inevitable question: “What’s next after the August rally?”
The answer seems to be more good news.
“Dollar Set for Longest Rally in Years With US Defying Global Gloom,” concluded George Lei for Bloomberg jubilantly this week. “U.S. currency is headed toward a straight 8th weekly advance. Reflects influx of cash as Fed seen holding rates elevated.”
“History US Dollar Run Sounds ‘Overbought’ Alarm,” cautioned Rita Nazareth in the same publication.
But the real story this week has been the underperformance of the Chinese yuan, specifically its significant decline.
Chinese Communist Party President Xi Jinping has spent the past few months propping up China’s economy and attempting to set its financial markets on a better track — unsuccessfully, as it turns out.
A week ago, the CCP took drastic steps to revive China’s floundering economy, passing a raft of measures designed to lift the yuan…