OANN — China should stop intervening in FX market and let yuan float: researcher

China should stop intervening in the foreign exchange market, devalue the yuan and let it float freely to restore stability, a senior researcher at a government-backed think tank said.
Xiao Lisheng, a finance expert with the Chinese Academy of Social Sciences, made the remarks in an article on Monday in the official China Securities Journal amid a growing debate among the country’s economists on whether authorities should let the closely-managed currency trade more freely.

The yuan lost 6.6 percent against the dollar last year, the biggest annual loss since 1994.
“The more the government delays the release of depreciation pressure, the greater the impact and destructive power of the release of depreciation pressure will be,” Xiao wrote.

The authorities should “let the yuan exchange rate have a one-off adjustment to realize a free float” of the currency, he said.…

Cut it loose.

One America News Network
China should stop intervening in FX market and let yuan float: researcher

Reporting by Winni Zhou and John Ruwitch; Editing by Kim Coghill

Zero Hedge — Yuan Dumps, Bitcoin Jumps As China Researchers Suggest "One-Off Devaluation" & Capital ControlsYuan Dumps, Bitcoin Jumps As China Researchers Suggest "One-Off Devaluation" & Capital Controls

Float that sucker. What are you waiting for?

Bite the bullet like Russia did and it was not the end of the world for them. The ruble stabilized relatively quickly and the Chinese economy is way larger than Russia's and not a victim of Dutch disease either.

China is very protective of national sovereignty. Currency sovereignty is a key piece in that.

Zero Hedge
Yuan Dumps, Bitcoin Jumps As China Researchers Suggest "One-Off Devaluation" & Capital Controls
Tyler Durden

Update

Chinese Interbank Lending Freezes; Government Bond Trading Halted After Massive PBOC Liquidity Drain

Cecchetti & Schoenholtz — China's Awkward Exchange Rate Regime

Float that sucker.

Perhaps the best way for China to counter President-elect Trump’s outdated claims of manipulation would be to let the currency float. In the short run, however, that would almost surely trigger a plunge versus the U.S. dollar. Given China’s strong penchant for market intervention—including its unfortunate role in the 2015-2016 stock market boom and bust—Chinese savers may simply rush for the exit, fearing that anxious policymakers will slam the gate quickly.

In the end, there is no way to make such a fixed exchange rate regime less awkward without risking a bout of instability. Over the long run, capital controls won’t solve the problem; instead, they will further diminish the efficiency with which the country’s savings are used. For a large economy like China that is integrated into the global trading system, the global norm is a floating currency. Absent a trade war (and perhaps even with one), that’s still probably where we are headed within a few years. And, it’s increasingly a question of when, not if.

Money and Banking
China's Awkward Exchange Rate RegimeStephen G. Cecchetti, Professor of International Economics at the Brandeis International Business School, and Kermit L. Schoenholtz, Professor of Management Practice in the Department of Economics of New York University’s Leonard N. Stern School of Business
ht Mark Thoma at Economist's View

Cecchetti & Schoenholtz are the authors of Money, Banking and Financial Markets.

Top News — China largely succeeds in RMB exchange rate reform

Longish and detailed. The short of it is that China has gotten a grip on the currency market thing and is now in a position to handle the peg professionally. The target is to maintain the RMB peg in a 2% plus and minus corridor against the USD.

Top News
China largely succeeds in RMB exchange rate reform

Michael Pettis — Do markets determine the value of the RMB?

Last Tuesday the PBoC surprised the markets with a partial deregulation of the currency regime, prompting a great deal of discussion and debate about the value of the RMB. Part of the discussion was informed by a consensus developing in one part of the market that the RMB is no longer undervalued but is in fact overvalued. Why? Because if left to the “market”, that is if the PBoC stopped intervening, the excess of dollar supply over demand would force the RMB to fall.

This argument is based on a pretty confused understanding of how markets work and why investors do what they do. I thought it might be useful if I were to try to lay out the issue a little more clearly, and along the way address related issues. Because it isn’t necessarily easy to tie all of the topics together in an essay, I thought it might be better if I put it in the form of a series of questions.

China Financial Markets
Do markets determine the value of the RMB?
Michael Pettis | Professor of Finance at Peking University’s Guanghua School of Management

Euro headed back down again after Monday's SNB-driven gains

Well, the euro is slinking back down again. At the moment it's given back more than 60% of Monday's Swiss National Bank driven gains. Talk in the market was that the SNB was buying euro and selling Swiss on Monday and that affected all Swiss franc and euro crosses.

As an aside just consider what a bunch of morons are over there at the SNB. They put on a peg, they take off the peg causing disaster for themselves and dealers and now they're back intervening again? Seriously? Guys and ladies...MAKE UP YOUR MINDS!

I've said it a zillion times: how do these people get these jobs?

Anyway, euro headed lower. Will be choppy all the way down, but eventually--maybe by September--we'll see parity (1:1) against the dollar and further down after that.

Europe's got problems. You don't need me to tell you that. The only way for Europe to stay solvent is for net exports to continue growing and with austerity in the U.S. and with Japan and China competing with Germany for the same export markets, you're going to see price cuts/lower  prices and that is a de-facto devaluation in the euro.

#SellRallies

Bill Mitchell — Denmark should abandon its euro peg

In my soon-to-be-published book on the Eurozone I examined the case of Denmark in some detail in the context of the evolution of the European Monetary System, the European Exchange Rate Mechanism (ERM), and the ratification process of the Treaty of Maastricht. Denmark was a participant in all the attempts to maintain fixed exchange rates after the Bretton Woods system collapsed in 1971. Further, while Denmark did not formally enter the monetary union by adopting the euro that doesn’t mean that they have maintained their currency independence. They chose instead to peg the Danish kroner against the euro (effectively continuing the ERM parities), which immediately meant that its central bank had to follow ECB monetary policy. Fiscal policy then became a passive player to ensure it didn’t exacerbate the peg parity and Denmark also bought into the Stability and Growth Pact fiscal rules. This meant that internal devaluation (wage cutting) was the only real counter-stabilisation option available to them when facing external imbalances and domestic recession. It hasn’t worked well as one would expect. In fact, the euro peg works against the interests of the Danish people, particularly low income workers prone to unemployment. Yet the nation has an obsession with maintaining it. Groupthink abounds. The correct policy strategy which would give the Danish government a wider range of policy tools to enhance the well-being of its people would be for Denmark to abandon its euro peg. It should do that virtually immediately.…

The post contains a history of currency unions in Europe and why the euro is another failed experiment.

Bill Mitchell – billy blog
Denmark should abandon its euro peg
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia