Bank of America: The ‘Great Divorce’ Between the World’s Two Largest Economies

Luke Kawa at Bloomberg quotes David Woo, head of global rates and currencies research at Bank of America Merrill Lynch:

“On the eve of the December FOMC meeting, we think the question is not whether the U.S. economy can live with higher interest rates and a higher U.S. dollar. The question is, given the semi USD/RMB peg and China’s increasing open capital account (which come at the expense of China’s monetary independence), whether China can live with higher U.S. interest rates and a higher U.S. dollar. We are skeptical. This is why we think the USD/RMB peg, a marriage of convenience that has been the anchor for the global growth model for the better part of the last 15 years, is headed for a divorce, and we think the RMB devaluation on Aug. 11 was a first small step in this direction.”

Read more at Bank of America: The ‘Great Divorce’ Between the World’s Two Largest Economies Will Drive Currency and Rates Markets in 2016 – Bloomberg Business

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