FX roundup

Comments of Fan Gang, director of the National Economic Research Institute at the China Reform Foundation, at Davos:

"The U.S. dollar is no longer -- in our opinion -- is no longer a stable currency, and is devaluating all the time, and that's putting [sic] troubles all the time.”

"So the real issue is how to change the regime from a U.S. dollar pegging ... to a more manageable ... reference ... say Euros, yen, dollars -- those kind of more diversified systems.”

"If you do this, in the beginning you have some kind of initial shock," Fan went on. "You have to deal with some devaluation pressures."

Keep in mind Fan is not an official spokesperson of the PBOC or the Ministry of Finance. Nevertheless, he represents at least one thread of the internal debate that must be ongoing among Chinese policymakers. The "shock" he refers to will be felt here as a dollar and interest rate crash.

Further analysis and commentary:
Setser blog
Sage Capital Zurich