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Currency News – Yuan Falls Vs The Dollar

Just as Joe Biden is getting ready to touch down in China, the Yuan fell a little bit against the Dollar after it has appreciated for the last little while.

Most people familiar with the situation have stated that it is probably the government sending a signal that it will keep the Yuan low and will not allow the low value of the USD cause any damage to their economy.

This is one of the main reasons that Biden is in Asia – he wants to let the Chinese know that the US is going to handle their debt issues in an expedient manner and that they don’t need to be deflating their currency. Doing so will protect their own economy, but it will put others around the world at a disadvantage.

 

Merkel and Sarkozy Fail To Deliver With New Euro Plan 

Investors are not the only ones who are disappointed with the progress at the Franco-German talks – other Euro countries are starting to display their displeasure with the speed in which issues are being handled.

On Wednesday, it was more of the same – lots of talk and proposals, but no concrete plan to build confidence. It has been stated by many people in the financial industry that there will be another European recession in less than three months if things continue on the same track, and unfortunately, that’s what seems to be happening.

 

Swiss Franc Starts To Rise Again

After the Franc seemed to be under control earlier this week on talk of a currency peg, it has started to rise to new highs again, and it doesn’t show any signs of slowing down.

Investors were disappointed with the lack of action by the SNB and have decided to keep on buying while it is still relatively low. The continuing turmoil around the world doesn’t help, either.

The main problem is the size of the Swiss Franc and the lack of ability that the SNB has to do anything. The Swiss is so small and the Euro zone and the US are so big that if investors want to buy up the Franc, there really isn’t any recourse for the SNB to take. They could peg it to the Euro, but that would be rather drastic and have it’s own set of side effects. Continue watching the Franc for the rest of the week, and if it continues to rise, expect some action by the SNB.

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