Today, from MarketWatch:
Long-term mortgage rates have dropped in eight of the last nine weeks to hit their lowest level since March.
Aha. A clear signal its time to review the latest evidence that, just maybe, change is a'comin on the dollar/RMB exchange rate. William Polley was all over the story last week, opining that it "certainly does seem reasonable for China to start widening the band" in which the RMB is allowed to trade. Sure enough, on Sunday this was the report from the Financial Times:
China is allowing the market to play an increasing role in setting the exchange rate value of the renminbi, while weakening the influence of a reference basket of currencies, according to Zhou Xiaochuan, central bank governor...
The role of the currency basket was “gradually diminishing” in favour of market supply and demand, Mr Zhou told Caijing, according to advance copies of the magazine’s reports seen by news agencies.
Beijing has not previously given any details of how the exchange rate regime works, but analysts say the currency basket’s influence has always appeared to be minimal and that in practice authorities retain full control over the renminbi’s value. But Mr Zhou’s remarks will be seen as a signal that the central bank remains keen to allow greater moves in exchange rates and to allow the renminbi to climb further against the dollar.
You, of course, have heard this before...
Mr Zhou said Beijing was committed to moving gradually towards a more flexible exchange rate mechanism.
... but Brad Setser informs us that it ain't getting any easier:
China is (once again) tightening up its controls on capital inflows, and loosening its controls on capital outflows. Forbes:
“The regulator has for several months been tightening up its supervision of short-term capital inflows and loosening up capital account controls on outflows as it fights off a wave of speculative funds betting on yuan appreciation.”
Those capital controls have certainly allowed the Chinese government to pursue their slow and easy approach to "a more flexible exchange rate mechanism" with great success. The burden of proof is probably on those who might suggest that they cannot continue on. But should it, by design or circumstance, prove otherwise, how long can those low US interest rates last?