Friday, March 26, 2010

What do the Following Countries’ Currencies Have in Common with China?

First List

Aruba florin
Bermuda dollar
Bahamas dollar
Bahrain dinar
Barbados dollar
Belize dollar
Bermuda dollar
Cayman Islands dollar
Cuban convertible peso
Djiboutian franc
East Caribbean dollar (Antigua, Dominica, St. Lucia, St. Vincent, Anguilla,
St. Kitts & Nevis, Grenada, Montserrat)
Eritrea navkar
Hong Kong dollar
Jordan dinar
Kuwait dinar
Macao pataca (pegged to Hong Kong dollar)
Oman rial
Qatar riyal
Saudi Arabia riyal
United Arab Emirates dirham

Second List (Use US dollars)

British Virgin Islands
East Timor
Ecuador
El Salvador
Federated States of Micronesia
Marshall Islands
Palau
Panama balboa
Turks and Caicos Islands
Zimbabwe

The first list of countries and affiliated or dependent territories pegs its currencies to the U.S. dollar at a fixed exchange rate. In some, e.g., Bermuda, Bahamas, Cayman Islands, the U.S. dollar circulates alongside the official local currency. (Kuwait has oscillated between a currency basket and the U.S. dollar.) The second list uses the U.S. dollar as its official currency, but the local currency (e.g., Panama balboa) and local coins may circulate alongside the dollar.

If the treasury secretary declares China an official currency manipulator, should he also declare all of them currency manipulators? Admittedly, China is much larger and its currency policy may have a larger impact on the U.S. economy and jobs. Still, principle is principle!

P.S. China’s currency peg to the U.S. dollar means that the recent rise in the dollar-euro rate has resulted in substantial appreciation of the yuan (Chinese currency) against the euro. Europe was China’s largest export market in 2009.

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