Will the Obama Administration Change Its Approach on China?

Tomorrow’s Treasury International Capital flow report will shed more light on whether the low yield in the US has driven sovereign wealth funds out of the US dollar. According to a recent report by China, they have continued to buy US dollars despite doubt that they would be unwilling to fund the growing US deficit.

With the Bush Administration leaving office on Tuesday, it is interesting to consider if the Obama Administration will change its approach on China. As Treasury Secretary, Paulson has favored the buddy versus bully approach to China. Although the Chinese Yuan has appreciated 15 percent over the past 2 years, it is still considered undervalued. If Obama labels China as a currency manipulator or takes more active measures to get the Asian giant to strengthen the Yuan, it could lead to further USD/JPY weakness as it would give the Bank of Japan less reason to intervene and sell the Yen.

About Kathy Lien 235 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of DailyFX.com, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Investopedia.com Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for Tradingmarkets.com, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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