I think the time of this is delicious!
So, the IMF added the Yuan to their imaginary currency basket known as the “Special Drawing Rights”, or SDRs.
Recall not long ago China tried to float their currency, and it went into a freefall, and they went back to pegging their Yuan to the Dollar. Which, given today’s report, it would have probably leveled out that way after falling quite a bit more.
Consider these two reports, first the news from China ……
HONG KONG (AP) — Chinese manufacturing was at its weakest in more than three years in November despite stimulus measures to bolster the world’s No. 2 economy while service industries improved, according to an official survey released Tuesday.
The manufacturing index based on a survey of factory purchasing managers slipped for the fourth straight month, falling to 49.6 in November from 49.8 the previous month.
The index is based on a 100-point scale, with the 50-point mark separating expansion from contraction……
Then, there’s this from the US, with a horrible joke in the article!!!
WASHINGTON (AP) — U.S. factory activity plummeted last month to the lowest level in more than six years, with a stronger dollar and low oil prices cutting new orders and hurting production.
The Institute for Supply Management said Tuesday that its index of factory activity in November dropped to 48.6 from 50.1 in October. Any reading below 50 signals contraction and the index has tumbled below that critical level for the first time since November 2012.
It now rests at its lowest level since June 2009, a worrisome sign as Federal Reserve officials will consider raising short-term interest rates this month on the understanding that the economy has sufficiently healed from the Great Recession.
Oh, yes!!!! Nothing like a contracting manufacturing industry to signal a healed economy!!!! Raising interest rates at this time would only cause further contractions.
For those unclear as to what adding the Yuan means it was put succinctly in the first link ……
The yuan’s government-set exchange rate still follows the dollar despite the new mechanism for setting its value. For now, that makes the yuan a dollar in disguise, according to Derek Scissors of the American Enterprise Institute in Washington. Until the yuan is allowed to trade freely, the IMF decision will “increase the dollar’s importance,” said Scissors in an email. “Those governments or investors hoping for a dilution of dollar dominance for portfolio diversification or political reasons are getting exactly the opposite.”
You know, if all of the currencies were allowed to float, the default currency used in transactions would be the one most stable, regardless of face value.