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| We offer a warning: The move on China's currency presages a big increase in interest rates. China's central bank controlled its exchange rate by selling yuan and buying Treasury bonds. As the country allows the yuan to rise, it will undoubtedly buy fewer Treasuries. The U.S. Treasury, meanwhile, will be selling record amounts of bonds as it attempts to raise nearly $4 trillion in the next 12 months to extend maturing debts and finance OBAMA!'s record deficits.
One other point to consider about a stronger yuan... It should allow China to purchase more commodities, which, along with a corresponding weaker dollar, should cause commodity prices to rise substantially. That's why crude oil jumped nearly 2% on the news. Freeport-McMoRan, the world's largest copper miner, gained 6%.
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Stansbury on China's currency move....
