While many central banks are still investigating the possibility of issuing a digital currency, China has rolled out a digital currency via a series of pilot programs since last year.
A few years ago, China’s currency seemed to be rising inexorably to global dominance. The renminbi had become the fifth most important currency for international payments, and in 2016, the International Monetary Fund (IMF) included it in the basket of major currencies that determines the value of Special Drawing Rights (the IMF’s global reserve asset). Since then, however, the renminbi’s progress has stalled.
The World Bank’s International Comparison Program (ICP) has just released its latest measures of price levels and gross domestic product (GDP) across 176 countries, and the results are striking. For the first time ever, the ICP finds that China’s total real (inflation-adjusted) income is slightly larger than that of the United States (US).
As the COVID-19 pandemic drives the global economy into recession, the temptation to pursue aggressive monetary easing is growing. Already, the United States (US) Federal Reserve (Fed) has pushed interest rates near zero and committed to pump trillions of dollars into the economy. The European Central Bank (ECB) has also ramped up bond purchases, though Germany’s constitutional court is mounting some resistance.
In early August, the renminbi’s exchange rate broke through the psychological threshold of CN¥7 per United States (US) dollar. While investors were still digesting the full significance of this event, US President Donald Trump’s administration startled the market by labelling China a “currency manipulator.”The designation is absurd, to say the least, because China doesn’t meet the US government’s own criteria for being a currency manipulator.
Vietnam may be one of the world’s fastest-growing economies, yet it’s still in the dark ages when it comes to joining the global trend toward cashless transactions. To understand why, look no further than to consumers like Tran Van Nhan, who recently bought his two-bedroom home in Hanoi with gold and a sack of cash.“We paid almost half in gold bars and the rest in cash,” Nhan, a 47-year-old shopkeeper, said of his new US$138,000 condo.
The baht is looking to repeat its performance as one of Asia’s best currencies last year. Monday’s growth data will shed light on a key pillar of its recent strength and may help it stay in pole position at least through the first quarter.After being beaten by only the yen in 2018, the Thai currency has outshone all its regional peers so far in 2019, rising by four percent against the United States (US) dollar.
Next month, the United States (US) Department of the Treasury is due to submit to Congress its biannual report detailing which countries, if any, are manipulating their currencies to gain an unfair trade advantage. For his part, President Donald Trump is already accusing China of doing so, as he did throughout the 2016 election campaign. And he is reportedly trying to influence the Treasury Department’s deliberations.What has changed since the last report in April?
China’s currency has started falling again. The last major depreciation of the Chinese renminbi began in the second half of 2015, triggered by a surge in capital outflows. Despite repeated interventions by the People’s Bank of China (PBOC), markets remained frenzied for more than a year. The currency’s value fell to nearly CN¥7 per United States (US) dollar, before stabilizing in early 2017.The latest decline has been even sharper.
The United States (US) dollar’s best quarterly run of Donald Trump’s presidency is no doubt causing discomfort in Asia. But while the greenback is getting expensive, it’s not yet scarce. To gauge the risk of a shortage, you have to read the political tea leaves from Kuala Lumpur to New Delhi and Beijing.Suppose you’re an Indian bank. A customer wants US$100 for three months.
China’s authorities, who’ve allowed the steepest yuan decline since the 2015 devaluation, are likely to step in and defend the currency should it fall further to a key level.Most of the 18 traders and analysts surveyed by Bloomberg say policy makers will act to slow the currency’s slide once it gets close to 6.7 per United States (US) dollar in China’s onshore market. That’s about one percent below current levels.
Malaysian Prime Minister Mahathir Mohamad said the ringgit’s fair value now is the same as the peg his previous government established in 1998 during the Asian financial crisis.Asked in an interview Friday what he saw as fair value for the currency, Mahathir said “3.8.” That’s more than five percent stronger than its current level against the United States (US) dollar, and a rate it hasn’t traded at since mid-2015, when turmoil in Chinese financial markets hit developing-nation assets.
