Todays Strategic Economic Dialogue (SED) talks between the US and China came up with nothing concrete on the currency front but both sides were very conciliatory suggesting that other issues are at play here. The US needs China to grow its domestic demand (so that the US can export more) plus the US is not in a great position to make demands given that it is reliant on China to buy its bonds.
The flip side to this of course is that US senators have put the Obama administration on notice that they want action on the currency front sooner rather than later. One must note that with China basically fixing the Yuan to the US dollar for the last 18 months, that on a trade weighted basis the Yuan is strengthening – just not against the US Dollar.
Meanwhile the Shanghai Composite ended up 3.5% today as officials back tracked on another property tax. This bourse of course is very volatile and shows little correlation to other markets. It does lead however with the SSEC bottoming in November 2008 a clear 4 months before other world equity markets did in March 2009.