The Biggest Ignored News

I’m surprised that this story isn’t getting more attention. The Chinese official reference rate for the yuan is now higher relative to the dollar than at any time since the Chinese authorities began pegging their currency to the dollar 19 years ago:

China’s yuan rose to a 19-year high after the central bank raised its daily reference rate to the strongest level in more than 10 months.

The People’s Bank of China increased the fixing by 0.08 percent to 6.2689 per dollar, the highest since May 2, 2012. The currency is allowed to trade 1 percent either side of the rate. The Purchasing Managers’ Index for manufacturing in March will be 51, indicating a sixth month of expansion, according to the median estimate in a Bloomberg News survey of economists before official data on April 1. President Xi Jinping is on his first foreign visit since taking over earlier this month and has held meetings with the heads of the so-called BRICs nations of Brazil, Russia and India as well as African countries.

I attribute a lot of the loss of manufacturing jobs in the United States as well as the remarkable level of asset inflation over the last several decades to the Chinese government’s management of the yuan.

It’s been suggested that this particular revision is politically motivated, something Xi Jinping can point to in his meeting with foreign leaders. I can’t help but wonder if it also suggests that the Chinese authorities think that the yuan is so undervalued now that letting it rise a bit won’t hurt them much. Or maybe they think that the dollar is weakening, which I’d find surprising since the more uncertainty there is in Europe the more I’d expect the dollar to strengthen.