And the point about managing one relationship (with the US) but not the other (with Europe, with the proviso you note about protecting increasing competitivity) is spot on.

In the long run, we're all dead. John Maynard Keynes

... a Singapore peg ... a peg to a basket of currencies ... and when they adopted it, in transition for a peg to the US$, the basket was clearly dominated by USD.

The smooth devaluation to the USD and spikiness to the Euro suggests that they are leaving the USD dominant in the peg and shifting the peg, but having the Singapore peg leaves them free to reduce the weight of the USD in their peg at any time.

Since the average valuations are heading in exactly the direction of the opportunity I pointed out earlier this year, allowing the USD rate to rise to lean against imported commodity price inflation, but not so far as to increase the valuation of the Yuan/Renminbi against the Euro, it would seem that the make up of the basket of currencies has a political benefit. If the US complains about the trade deficit, they can say, "but the yuan is revaluating against the dollar", while if Eurozone nations complain about the trade deficit, "but, that's just the float against the dollar ... we are revaluing against the dollar, but we can only go so fast if we are going to avoid economic distress".


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.