Are major exporter countries to the United States really manipulating their currency to boost exports?

The Euro Area, China, Canada, Mexico and Japan together account for over 70% of U.S. trade. Have these countries (including the Euro Area group of countries) manipulated their currencies to boost exports? In this century (2000 onwards) the Chinese Yuan, the Canadian Dollar and the Euro have appreciated against the dollar. The Japanese Yen has been largely unchanged against the U.S. dollar since the start of this century and only the Mexican Peso has weakened against the dollar.

Continue reading “Are major exporter countries to the United States really manipulating their currency to boost exports?”

China hasn’t been selling U.S. Government Bonds despite trade tensions

Is China selling U.S Government Bonds (Treasury Bills, T-Bonds and Notes) given the trade war tensions between China and the United States? The simple answer to that is no. Actually, no major foreign country holder of bonds is really selling.

But you might wonder what is going on if you make a chart look like this,

China holdings of US government bonds
Data Source: U.S. Department of the Treasury

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Here’s how much money supply has grown for major economies in the past decade (2008 to 2018)

Broad Money M3

Broad money (M3) includes currency, deposits with an agreed maturity of up to two years, deposits redeemable at notice of up to three months and repurchase agreements, money market fund shares/units and debt securities up to two years.

M3 Money Supply Growth Global
Source: Organization for Economic Co-operation and Development

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Weekly Overview: Emerging Market Rout; New Italian Government; Japan GDP; Oil surge continues

Emerging Markets are being routed with rising oil and a soaring US dollar

Here is the performance of the US dollar against emerging market currencies (figures in brackets are 1-month % change),

USD/MXN – Mexico 19.9450 (+8.17%)
USD/INR – India 67.9850 (+3.23%)
USD/TRY – Turkey 4.4894 (+10.07%)
USD/BRL – Brazil 3.7375 (+10.33%)
USD/ZAR – South Africa 12.7550 (+6.71%) Continue reading “Weekly Overview: Emerging Market Rout; New Italian Government; Japan GDP; Oil surge continues”

Apparently, there are days when no one trades some Japanese government bonds; Could China devalue their currency or sell US Treasurys?

Some 80% of 10-year Japanese government bonds are held by the Bank of Japan. And apparently there are days when no one trades those 10-year bonds because there is no point of trading it. Why? Well, because the Bank of Japan has a policy to control yield curves and since they hold majority of it there are hardly any price movements.

But is also claimed that there are days when the 2-year bonds aren’t traded. That is interesting because the Bank of Japan only holds a small proportion of 2-year bonds. How to traders keep their jobs then? They trade bond futures instead. Continue reading “Apparently, there are days when no one trades some Japanese government bonds; Could China devalue their currency or sell US Treasurys?”

High (or hyper) inflation or long term zero (or negative) interest rates – how might the world pay its debt?

The divergence of interest rates, bond yields, inflation, currency strength, budget deficit and total debt of countries around the world has never been bigger. We look at how the US, the UK, the Eurozone, Japan, Switzerland and India are doing in addressing paying off their debt. Continue reading “High (or hyper) inflation or long term zero (or negative) interest rates – how might the world pay its debt?”