Senate Majority Leader Says Senate Will Take up China Currency Bill

Uh-oh. This one could be trouble. With the economy weak and populist sentiment running strong, nothing would be more politically popular than a bill that would sanction China for not floating its currency.

It would be popular but it would also be dangerous.

As everyone knows, china is the main foreign buyer of US debt. They could cause a lot of mischief if they so desired.

The talk of a bill is likely more productive than the actual passage of a bill as China responds better to cajoling than out-right threats….

With inflation running hotter than Chinese officials would like, the timing of a firmer currency might suit Beijing anyway. They can allow US politicians a victory if they allow a faster appreciation of the Yuan and rein in inflation at the same time, a win-win.

Originally posted at ForexLive.