Through TheFLY's Eyes: China & the U.S. dollar

from Theflyonthewall.com
















Dem. Party Victory Might Mean Continued China-Currency Appreciation

The media is starting to report again that the weakening of the U.S. dollar means bad things for the US economy. On Monday, the dollar continued its decline against other major currencies, retreating to Eur1.31 and $1.93 British pounds. It must be the inherently bad U.S. trade deficit that is causing the decline in the dollar, journalists and network commentators suggest. Last week, the entire CNBC Squawk Box team was squawking off about the trade deficit with China having a deleterious impact on the United States.

CNBC's bantering comes as U.S. Treasury Secretary Paulson and U.S. Federal Reserve Chairman Bernanke are about to travel to China to persuade officials to let the yuan currency further appreciate versus the US dollar.

While the Bush Administration is now a lame-duck presidency, Paulson and Bernanke might still have success as China officials will most likely want to avoid a battle with the new Democrat-led U.S. Congress with Sen. Charles Schumer (D-New York), Congressmen Barney Frank (D-Massachusetts) and Congressman Charles Rangel (D-New York) taking charge of policy.

Look for China to agree to a continued slow and steady appreciation of the yuan versus the U.S. dollar to avoid any nasty retaliation from the new U.S. Congress