Wall Street Journal Exchange Rate Fail

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I’m old enough to remember when the Wall Street Journal news division could at least get the basics of economics and finance correct. Today’s edition (September 16 2022) included an egregious case of Wall Street Journal exchange rate fail. Reporter Rebecca Feng apparently does not know even the most basic facts about exchange rates.

The article is about the recent depreciation of China’s yuan renminbi (¥) vis-à-vis the U.S. dollar. The chart accompanying the article is correct:

WSJ exchange rate chart is correct Wall Street Journal exchange rate fail

(click for larger image)

The problem is Ms. Feng’s interpretation. Here’s what she has to say:

China’s currency has fallen below a widely watched level against the dollar, breaking 7 yuan for a dollar for the first time in more than two years.

On Thursday evening in Hong Kong, the more freely traded offshore yuan weakened below 7 to the dollar for the first time since July 2020. That has long been an important level for the currency pair. When the yuan, also known as the renminbi, crossed 7 against the dollar in August 2019, then-U.S. President Donald Trump accused China of currency manipulation.

The offshore yuan was recently trading at 7.0072 against the dollar. In the more tightly controlled onshore market, the yuan hit 6.99 against the U.S. currency.

Read that carefully. Ms. Feng thinks an exchange rate change from 7¥per U.S. dollar to 6.9¥ per dollar is a currency depreciation. That’s backwards (and contradicts the chart). In fact, that’s why the scale on the chart is from low to high – a currency depreciation means the line slopes downward.

Ms. Feng should print out the following and post it above her computer’s monitor.

Appreciation and depreciation definitions Wall Street Journal exchange rate fail

(click for larger image)

Yes, it’s really that simple.


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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.