China Fears Euro Slide(while Zero harping on trade deficit)

China is citing Europe's debt crisis as a new concern for its currency policy, but U.S. patience over trade deficits may be wearing thin.

BOSTON—Europe's debt crisis may be the latest trouble for China's controversial currency policy, but experts say it should be no reason to stall needed reforms.

Chinese officials are said to be delaying a long-awaited increase in the value of the yuan because of concern about new economic pressures in its largest export market.

While the euro plunged to a four-year low against the dollar on May 17, it has also dropped by some 14 percent against the yuan this year, making Chinese products more costly to buy.

Analysts say that despite growing pressures for appreciation of its undervalued currency, China may be getting cold feet as it worries about the price effect in Europe and the prospect of lower demand for its goods.

"I think they were getting to a decision to revalue, and then this came along and created uncertainty," said Harvard University economics professor Dwight Perkins. "It hit home to them that the euro isn't all that stable."

reprise (quoting, I didn't write this):

OPEC Has Already Turned to the Euro
GoldMoney Alert
February 18, 2004
...The source for the euro exchange rate is the Federal Reserve, and I have calculated the euro's average exchange rate to the dollar for each year based on daily data.

US Imports of Crude oil
(1)	(2)	(3)	(4)	(5)	(6)
Year	Quantity (thousands of barrels)	Value (thousands of US dollars)	Unit price (US dollars)	Average daily US$ per € exchange rate	Unit price (euros)
2001	3,471,066	74,292,894	21.40	0.8952	23.91
2002	3,418,021	77,283,329	22.61	0.9454	23.92
2003	3,673,596	99,094,675	26.97	1.1321	23.82

We can see from column (4) in the above table that in 2001, each barrel of imported crude oil cost $21.40 on average for that year. But by 2003 the average price of a barrel of crude oil had risen 26.0% to $26.97 per barrel. However, the important point is shown in column (6). Note that the price of crude oil in terms of euros is essentially unchanged throughout this 3-year period.

As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar's decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC's members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.

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