Why Stronger Chinese Yuan Would Benefit US Investors
Posted By: Jeff Cox | CNBC.com
A stronger Chinese currency, which the nation’s government indicated could happen in the months ahead, would come at an ideal time for US markets.
As the US economy continues its sluggish recovery, a stronger Chinese yuan would help bolster US exports while offsetting the Federal Reserve’s expected increase in interest rates next year, in part to support the weakening dollar.
While it remains uncertain whether China actually will follow through on hints this week that it will let the yuan rise against the dollar, the fact that Beijing is addressing the issue is reason for optimism in the West.
"It would be bullish for everybody but China, really, because it means you’d have better exports and better growth in the Europe and US," says Kurt Karl, chief economist at Swiss Re in New York. "Because it would be stimulative to the economy it would be counteractive to the Fed tightening. It would be wonderful timing if they could do it then, even more helpful if they could do it earlier."
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