China’s currency is weathering emerging headwinds
Whilst analysts sometimes see emerging markets as a coherent bloc, not all of their currencies perform the same. The yuan, China’s currency, emerges as a clear winner: it’s the only currency to hold its ground against the dollar in a downbeat macroeconomic climate. It has appreciated 1 per cent since June 30, whilst the India Rupee’s lost 6.6 per cent, Russia’s rouble 8.2 per cent and Brazil’s Real 8.3 per cent.
The general slide, as we saw yesterday, seems linked to growing concerns over the Bric’s loosening resolve to fight inflation. The speed of currency depreciation, indeed, seems to correlate relatively well with the rise of prices in each of them - take the rupee, for example.
But China’s outstanding performance shows that perceived resolution to act against rising prices is just as important. Today, despite growth expectations revised downwards by the Asian Development Bank, Prime Minister Jiabao pledged continued tightening of monetary policy, and singled out controlling inflation as the government’s macroeconomic priority (again). Amid troubled waters in the emerging world, China’s stable monetary policy seems to be paying of – in for of a stable currency.