Will Obama Increase Pressure on China Regarding the Yuan?

Among the mumblings that circulate in Washington about foreign currency exchange is the regular lament that China is a currency manipulator. Although this is said quietly, and any real pressure on the Chinese to allow yuan appreciation is rarely brought to bear.

But will that change with the Barack Obama presidency?

Both Obama and his Treasury nominee, Timothy Geithner, say that they want to pressure China into allowing more natural yuan appreciation. But it may not get the support it needs in Congress. And, more importantly, even if Congress does legislate something, China is unlikely to comply.

China doesn't really worry about the U.S.

The bottom line is that China doesn't really worry about the U.S. China desn't have to. Our government can threaten all it wants, but the bottom line is that China is our biggest debt holder. All China has to do is call in the debt -- or threaten to -- and an impasse holds.

Honestly, the U.S. really isn't in a position to make demands on what China does, or doesn't do, regarding yuan appreciation.

Canadian Dollar Continues to See Gain in Currency Trading

Recently, thanks to risk aversion, falling stock markets and dropping oil prices, the Canadian dollar has been losing value in a variety of currency pairs on the FX market. Today, though, marks the fourth session that the loonie has gained in forex trading.

As risk appetite improves, so does the performance of the Canadian dollar in currency trading. Indeed, investors are starting to feel cautiously optimistic, and this is buoying up the Canadian dollar as equities and oil prices make a bit of a comeback.

Bloomberg reports on how well the loonie is doing right now in forex trading:
“The Canadian dollar has caught a consistent bid,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “Equities are posting gains right now, so there’s a better appetite for risk, which is contributing to gains for the currency.”

Timothy Geithner Confirmed as Treasury Secretary

President Barack Obama's pick for Treasury Secretary, Timothy Geithner, was confirmed by the Senate last night. It was no surprise that Geithner was confirmed -- despite the snafu over his tax evasion a few years ago.

Geithner said all the right things, championing a strong dollar policy and taking a hard line on China's alleged currency manipulation. However, it remains to be seen whether or not these positions will actually bear out. The U.S. can actually do very little to China to enforce its demands, and a strong dollar policy hasn't been the U.S.'s forte on a practical level for years (no matter what politicians have said).

However, there is optimism regarding the appointment, since many believe that Geithner means what he says when he proclaims that there should be a fast action on economic stimulus. This is providing a degree of hope -- at least for some -- that the economy might soon start a recovery from recession.

Even with Yen Lower Today, Intervention on the Table

The Japanese yen, like the U.S Dollar, has been seen as a safe haven currency through this financial crisis and global recession. However, like the dollar, the yen is down right now in forex trading. This is because as optimism rises for plans of economic stimulus, demand for safe havens decline -- risk appetite is improving.

But that does not mean that the Japanese government has completely abandoned its plans to possibly intervene in the FX market. After all, even though the yen is lower in forex trading, it is still at levels not seen for years. And the possibility of upward momentum is still there, since after the economic stimulus package is passed, it may not be deemed enough to reverse the current recession.

However, even as montary leaders in Japan consider releasing its reserves into the market to reduce the value of the yen, there is reluctance: The G8 disapproves, and Japan doesn't want to run the risk.

Russian Ruble: Poised to Break Through Target

One of more interesting currency market dramas playing out right now is that of the Russian ruble. The government has set a target level of 36 per dollar, but that seems as though it could be smashed fairly soon.

In the last two days, the ruble has declined about 5.5%, and not much more is needed to push the currency below the target. The global financial crisis and recession, coupled with dramatically sliding oil prices, has wreaked havoc with the ruble on the forex market.

Down Under Currencies Slide in FX Trading

Both the Aussie and the kiwi are lower in forex trading on the currency market today. Like the Canadian dollar, the down under currencies are commodity currencies in FX trading. This means that global recession is taking rather a large toll on the economies connected to those currencies.

Another problem is that the down under currencies are seeing rather significant cuts to their yields. Before, the kiwi and the Aussie were seen in forex trading as high yielders. However, interest rate cuts in Australia and New Zealand have damaged the yield -- giving no big advantage over lower yielding currencies.

On top of this, risk aversion has meant an almost complete cessation of the Japanese yen carry trade. And the down under currencies were major beneficiaries of the yield difference in this move. Now there is very little to temp forex traders to the kiwi and the Aussie.