controversies'What is surprising is that the currency derivatives, Currency 2010
The timing of the resignation — two days ahead of the swearing-in-ceremony of the new Council of Ministers on Wednesday — rattled the party in the State. Chief Minister N. Kiran Kumar Reddy, who returned from New Delhi after completing the exercise of choosing his Ministers, hurriedly convened a meeting of MLAs and MLCs to review the sudden turn of events. Earlier in the day, Mr. Jaganmohan Reddy's followers tore away posters and burnt effigies of Ms. Sonia Gandhi in several places and staged demonstrations against the AICC. In Mr. Reddy's native Kadapa, the District Congress Committee (DCC) office-bearers resigned en masse, ransacked furniture and re-named the party office from Indira Bhavan to YSR Bhavan.
The Congress was, however, prepared for this eventuality and had secured from Mr. Chiranjeevi's Praja Rajyam a promise to support the government. A PR spokesperson said, “if there is a crisis, we will extend outside support to the Congress as we promised earlier. But, we will not join the Cabinet.” ..The U.S. House of Representatives has with a 348-to-79 majority passed a bill that allows the country to impose countervailing duties on imports from China. Those duties are to be calibrated using estimates of the extent of “undervaluation” of the renminbi, to signal that, in the U.S.’ view, China is manipulating its currency for export gain and generating global current account imbalances in the process. This round of China bashing has been justified by referring to the evidence that while China unpegged the RMB from the dollar in June this year, the currency has appreciated only marginally.
Thus, the accusation is not that China is resorting to devaluation, but that it has not “permitted” adequate appreciation despite its trade and current account surpluses, especially vis-à-vis the United States.
What is surprising is that the House has resorted to this move despite evidence that in the past and even today, intervention in various forms to prevent currency appreciation or even ensure depreciation of currencies has been the norm. The United States, which protests much today, had exercised its global economic and political power to ensure the depreciation of the dollar vis-à-vis other leading currencies, especially the Japanese yen, through the Plaza Accord of 1985.
A year and a half later it engineered the Louvre Accord to prevent further decline of the dollar.
Currency manipulation is an old G8 practice. Most recently, the Bank of Japan intervened in its currency market to purchase 20 billion dollars in return for Japanese yen allowing it to stabilize an appreciating currency and ensure its depreciation from 83 yen to the dollar to around 85 yen to the dollar. Since the Japanese economy is still in deflationary mode, the injection of liquidity into the system to manage the currency does not stoke fears of inflation.
While preparing for any eventuality, the government does not feel immediately threatened. Firstly, Mr. Reddy declared in his letter that he would not ask MLAs in his camp to resign. Secondly, the ruling party is convinced that he does not have sufficient following among the MLAs to pull down the government. .Currency manipulation is an old G8 practice. Most recently, the Bank of Japan intervened in its currency market to purchase 20 billion dollars in return for Japanese yen allowing it to stabilize an appreciating currency and ensure its depreciation from 83 yen to the dollar to around 85 yen to the dollar. Since the Japanese economy is still in deflationary mode, the injection of liquidity into the system to manage the currency does not stoke fears of inflation.
Japan’s decision to intervene does weaken the legitimacy of the attack on the renminbi implicit in the U.S. bill and of the pressure being mounted by the G20 on China to ensure further appreciation of the yuan. However, while Japan’s move has indeed been criticized by many of its trading partners, dissent is muted because of the recognition that Japan has suffered for long from a recession that was triggered in part by developments flowing from the appreciation of the yen consequent to the Plaza Accord.
Moreover, central banks from many other countries have been and are intervening in currency markets to hold down the value of their currencies. This is true, for example, of South Korea, India, Malaysia, Taiwan, the Philippines and Singapore. Their moves have received global attention ever since Guido Mantega, Brazil’s finance minister, declared that a currency war had broken out in the global economy. “We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness,” Mr. Mantega reportedly said. In doing so he was being disingenuous because Brazil’s immediate problem is not the weakening of the currencies of its competitors but the strengthening the Brazilian real which has been identified as one of the world’s most overvalued currencies.
The Congress was, however, prepared for this eventuality and had secured from Mr. Chiranjeevi's Praja Rajyam a promise to support the government. A PR spokesperson said, “if there is a crisis, we will extend outside support to the Congress as we promised earlier. But, we will not join the Cabinet.” ..The U.S. House of Representatives has with a 348-to-79 majority passed a bill that allows the country to impose countervailing duties on imports from China. Those duties are to be calibrated using estimates of the extent of “undervaluation” of the renminbi, to signal that, in the U.S.’ view, China is manipulating its currency for export gain and generating global current account imbalances in the process. This round of China bashing has been justified by referring to the evidence that while China unpegged the RMB from the dollar in June this year, the currency has appreciated only marginally.
Thus, the accusation is not that China is resorting to devaluation, but that it has not “permitted” adequate appreciation despite its trade and current account surpluses, especially vis-à-vis the United States.
What is surprising is that the House has resorted to this move despite evidence that in the past and even today, intervention in various forms to prevent currency appreciation or even ensure depreciation of currencies has been the norm. The United States, which protests much today, had exercised its global economic and political power to ensure the depreciation of the dollar vis-à-vis other leading currencies, especially the Japanese yen, through the Plaza Accord of 1985.
A year and a half later it engineered the Louvre Accord to prevent further decline of the dollar.
Currency manipulation is an old G8 practice. Most recently, the Bank of Japan intervened in its currency market to purchase 20 billion dollars in return for Japanese yen allowing it to stabilize an appreciating currency and ensure its depreciation from 83 yen to the dollar to around 85 yen to the dollar. Since the Japanese economy is still in deflationary mode, the injection of liquidity into the system to manage the currency does not stoke fears of inflation.
While preparing for any eventuality, the government does not feel immediately threatened. Firstly, Mr. Reddy declared in his letter that he would not ask MLAs in his camp to resign. Secondly, the ruling party is convinced that he does not have sufficient following among the MLAs to pull down the government. .Currency manipulation is an old G8 practice. Most recently, the Bank of Japan intervened in its currency market to purchase 20 billion dollars in return for Japanese yen allowing it to stabilize an appreciating currency and ensure its depreciation from 83 yen to the dollar to around 85 yen to the dollar. Since the Japanese economy is still in deflationary mode, the injection of liquidity into the system to manage the currency does not stoke fears of inflation.
Japan’s decision to intervene does weaken the legitimacy of the attack on the renminbi implicit in the U.S. bill and of the pressure being mounted by the G20 on China to ensure further appreciation of the yuan. However, while Japan’s move has indeed been criticized by many of its trading partners, dissent is muted because of the recognition that Japan has suffered for long from a recession that was triggered in part by developments flowing from the appreciation of the yen consequent to the Plaza Accord.
Moreover, central banks from many other countries have been and are intervening in currency markets to hold down the value of their currencies. This is true, for example, of South Korea, India, Malaysia, Taiwan, the Philippines and Singapore. Their moves have received global attention ever since Guido Mantega, Brazil’s finance minister, declared that a currency war had broken out in the global economy. “We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness,” Mr. Mantega reportedly said. In doing so he was being disingenuous because Brazil’s immediate problem is not the weakening of the currencies of its competitors but the strengthening the Brazilian real which has been identified as one of the world’s most overvalued currencies.
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