2010-10-05

Yuan appreciation and crude oil


With Japan's failed efforts to keep the yen from appreciating, the BOJ's interest rate cut to zero having an effect measured in hours and the subsequent effect on the gold price, I thought it be worth it to take a look at the renminbi versus oil.

I have no idea whether this situation it will repeat. I used today's data for the last data point, but monthly data back to 2005. As the chart shows, it took a long time for the effects to kick in, but once the renminbi started appreciating more rapidly, oil also began a steep ascent. Using this recent data gives the appearance of an effect that does not exist, but if the race to devalue is on then it may well be that this is the start of it. Oil prices are likely to rise no matter what if nations devalue their currencies, but if there's a Chinese carry trade in oil or other commodities, there will another bubble. Also pay attention to real estate, stocks and inflation rates in China.

A condensed version is cross posted here: 人民币美元汇率和石油价格.

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