Senate "Poised To Follow" Through In China Currency Legislation
It appears that the next round of the trade war is imminent: per Reuters, Senate Finance chair Baucus has said that the Senate is "poised to follow" the House in passing China currency legislation. Expectations were that this law would not pass for a while and certainly not before the mid-terms. It appears the Senate, in its own attempt to generate some populist Brownie points, and unable to grasp that the whole point with the weak CNY is an even weaker USD. What this is certain to do is escalate an already tenuous situation, and lead to even more jawboning in US-Sino relations. We are confident that the decreasing indirect participation in the recent 3 and 10 year auctions is a direct consequence of what China's retaliation will ultimately look like.
And for more information, Market News noted the following on just how close to approval of the currency legislation by the Senate we currently are.
The Chinese government was receptive to a message delivered by Senator Max Baucus about the severity of the threat posed by a proposed Senate currency bill aimed at punishing China for its exchange rate policy, the Senate Finance Committee chairman told reporters here Wednesday.
Baucus (D-Mont) said that there is a "very real possibility" that the currency bill could pass, and said government officials that he met here -- who included Vice-Premier Wang Qishan -- took the message on board.
"My main point was that (the bill) is very serious and they understood it. They took it constructively and soberly. The goal is that both countries resolve this issue. A lot of people in the Senate think that an undervalued (yuan) costs jobs and I conveyed that to the leadership," he said.
He was speaking just hours after the Chinese government announced that the politically charged trade surplus fell to a five-month low on record imports.
But the People's Bank of China later reported that the country's foreign exchange reserves surged a record $194 billion during the third quarter to $2.65 trillion.
Reserve growth is the direct result of the central bank's daily interventions in the onshore currency market.