| With the US Federal Reserve’s first rate rise approaching, China’s belated decision to allow the renminbi to depreciate bears hallmarks of the Swiss National Bank’s pre-emptive reaction to European quantitative easing in January. The lessons from other discarded currency pegs loom large.
The lesson from Asia and Latin America in the 1990s was that currency pegs reinforced and indeed exacerbated financial cycles. Asset prices tended to overshoot on the upside, creating macro imbalances that were eventually corrected through catastrophic devaluations...............................................Full Article: Source
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