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- China is no Mexico, an oil exporting country feeling under pressure to raise interest rates in the face of a slowing economy and worsening terms of trade precisely because it fears the consequences of losing control of the peso.
- The huge decline in China’s raw material costs, especially the slump in both iron ore and oil, have massively improved the country’s standing and the trade weighted currency has appreciated in tandem; it may be as simple as that.
- In contrast, the free-fall in the currencies of Russia and Brazil seems to match the devastation in their terms of trade as their important raw material exports have suffered from tremendous deflation with no meaningful offset in other inputs.