Legendary investor George Soros talked about the relationship between the U.S. dollar and Chinese yuan yesterday among other financial issues. Svea Herbst, Glenn Somerville, and Phil Wahba wrote in Reuters (India):

Billionaire investor and philanthropist George Soros said on Thursday that the world’s current “currency arrangements” are fraught with danger and that the world needs global regulation.

Soros, who runs hedge fund firm Soros Fund Management and has made his reputation with bold currency bets, said the U.S. dollar ought to be falling in value against the Chinese currency to allow the United States to contain its current account deficit.

However, Soros said because the renminbi is tied to the greenback, the Chinese currency is constantly undervalued leaving the dollar to sink against the world’s other major currencies…

Meanwhile, an undervalued yuan makes Chinese consumer goods cheaper in foreign markets. Beijing has powered the country’s growth by targeting U.S. and other consumer markets with its exports, putting many producers in those markets out of business because they cannot compete.

The Hungarian-born investor also talked about global economic growth and a Chinese asset bubble. Herbst, Somerville, and Wahba added:

Turning to the world economy, Soros said “the world economy is going to have some growth, but we are bound to be flat.”

He also said the U.S. is going to be a drag on world growth.

In China, Soros said he also believes there is a something of an asset bubble.

Source:

“UPDATE 1-Soros says U.S. economy will be drag on world growth”
Svea Herbst, Glenn Somerville, and Phil Wahba
Reuters (India), October 16, 2009

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