I was curious about demand for the U.S. dollar versus the Chinese yuan in terms of the British pound, the euro, and the Indian rupee. Given the state of Georgia’s export efforts, I wanted to determine what Georgia should be keeping its eyes open for when it comes to competition between the dollar and the yuan.
Georgia’s gubernatorial campaign is heating up. It has been my experience that candidates nary make mention of export efforts. If you are going to talk about exports, you have to talk about currencies. From what I have gathered so far, only Libertarian Party candidate Shane Hazel has provided serious discussion about currencies. Democratic Party candidate Stacey Abrams and the Republican incumbent governor Brian Kemp have been pretty much mum on the topic.
Now, using data from OANDA, a look at the numbers. During the period 11 February 2021 to 11 February 2022, the price of the US dollar in terms of the British pound has appreciated two percent in price from GBP0.72283 to GBP0.73733. In terms of the euro, the dollar has appreciated six percent over the same period from EUR0.82467 to EUR0.87449. In terms of the Indian rupee, we see price appreciation of three percent from INR72.8104 to INR74.9521.
Compare the above with appreciation of the dollar price in terms of the yuan. Between 11 February 2021 and 11 February 2022, the price of the Chinese yuan in terms of the British pound rose just over three percent from GBP0.11207 to GBP0.11593. In terms of the euro, the yuan appreciated over seven percent from EUR0.12786 to EUR0.1375. Lastly, in terms of the Indian rupee, the yuan appreciated over four percent from INR11.2885 to INR11.7846.
There is a currency war brewing between China and the United States. This war tends to get mentioned in passing during broader political discussions in Washington, DC about the economic and competitive threat China poses to the United States. What gets overlooked is Europe’s political and geographic middle position. Europe has been buying less expensive technology from China; thus has a demand for Chinese currency. In addition, with the Federal Reserve preparing to hike overnight interbank lending rates as early as next month, Georgia’s exporters may be seeing an increase in the cost of doing business and may seek assistance from the state to help keep their prices competitive globally.
The candidates should be contributing to the conversation on trade, preferably encouraging policies that facilitate infrastructure investment. The conversation should begin with an appreciation for what’s happening in the currency markets.