Candidates for Georgia governor should be mindful of price appreciation for yuan vs dollar.

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.

Alton Drew

02.11.2022

Interbank Market News Scan: U.S. inflation rate at 7.5%

Interbank, United States, Inflation. “In January, the Consumer Price Index for All Urban Consumers rose 0.6 percent, seasonally adjusted, and rose 7.5 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.6 percent in January (SA); up 6.0 percent over the year (NSA).” See report here. Source: U.S. Bureau of Labor Statistics

Interbank, Pakistan. “The buying rate of 1 SAR to PKR was Rs46.710 and selling rate of 1 SAR to PKR was Rs46.790 in the interbank market on Feb 10, 2022.” See article here. Source: BOL News

Interbank, China. “The central parity rate of the Chinese currency renminbi, or the yuan, weakened 84 pips to 6.3653 against the U.S. dollar Wednesday, according to the China Foreign Exchange Trade System.” See article here. Source: China.org

Interbank, Taiwan. “The central bank has asked exporters to sell their US dollar holdings at different times to avoid causing a sudden appreciation of the NT dollar.” See article here. Source: Taipei Times

Interbank, Japan. “Global shares rose Thursday as investors tried to gauge U.S. inflation, tensions between Russia and Ukraine and the impact of the pandemic.” See article here. Source: News4Jax

Foreign exchange rates of interest as of 8:16 am EDT

EUR/USD=1.1427

GBP/USD=1.3553

USD/MXN=20.5344

USD/GTQ=7.52045

USD/NGN=415.844

USD/GHS=6.36299

USD/VND=22,694.9

USD/JPY=115.45

USD/INR=74.6951

USD/BTC=0.00002

USD/ETH=0.00032

Source: OANDA

Dollar Index (DXY)=95.51

Source: MarketWatch

Interbank Market News Scan: Pakistan rupee losing against the dollar; Reserve Bank of Australia under pressure to hike rates; Bitcoin strengthens.

Interbank, State Bank of Pakistan. “The rupee continued to register marginal losses against the US dollar on Wednesday amid a slight uptick in greenback demand from importers.” See article here. Source: GeoNews

Interbank, Reserve Bank of Australia. “Bonds extended their losses as financial markets ramped up the pressure on the Reserve Bank of Australia to raise the cash rate as soon as May, in response to persistent inflationary pressures challenging its dovish stance.” See article here. Source: Financial Review

Interbank, Nepal Rastra Bank. “Foreign reserves have depleted due to high imports in the country. According to the data released by Nepal Rastra Bank (NRB) the current foreign reserves can support the import of goods and services for six and half months only.” See article here. Source: Khabarhub

Interbank, Bangladesh. “The Bangladesh Bank has asked foreign-currency dealer banks to submit their daily exchange position statements using a new rationalised input template (RTI) to ensure better monitoring. In a circular on Monday, the central bank said it had decided to replace the existing RTI for further convenience of supervision.” See article here. Source: The Business Standard

Foreign exchange, India, travel. “With countries around the globe opening doors to vaccinated travelers, foreign travel bookings are witnessing a massive surge in India. The rise in globetrotting among Indians has led to a considerable increase in forex transactions as well.” See article here. Source: IndianWeb2

Foreign exchange, South Africa, rand. “A generally weakening rand and mounting inflationary pressures have meant the South African Reserve Bank (SARB) has once again raised interest rates, to the distinct detriment of the weakest members of our society.” — Brian Benfield. See article here. Source: BizNews 

Foreign exchange rates of interest as of 9:18 am EDT

EUR/USD=1.1418

GBP/USD=1.3539

USD/MXN=20.6288

USD/GTQ=7.5230

USD/NGN=415.644

USD/GHS=6.3541

USD/VND=22,706.1

USD/JPY=115.431

USD/INR=74.6417

USD/BTC=0.00002

USD/ETH=0.00032

Source: OANDA

Dollar Index=95.47

Source: MarketWatch

Interbank Market News Scan: Foreign exchange and crypto rates of interest as 9:51 am EDT

EUR/USD=1.1294

GBP/USD=1.3550

USD/MXN=20.5450

USD/GTQ=7.5086

USD/NGN=415.203

USD/GHS=6.2762

USD/VND=22,646.7

USD/JPY=114.49

USD/INR=74.7325

USD/BTC=0.00003

USD/ETH=0.00036

Source: OANDA

MarketWatch Dollar Index: 95.53