Banking

The bulk of economists surveyed by The Wall Street Journal would bet on the Chinese yuan rising over the next three years and the euro falling–but they’re split on the direction the U.S. dollar is likely to take.

The Journal surveyed 54 economists, not all of whom answer every question and most of whom are U.S.-based, and asked which one currency they would bet on rising in value over the next three years. Eighteen, or 43% of the 42 who responded to the question, pointed to the Chinese yuan. “Chinese inflation makes artificially low values difficult to sustain,” said Sean M. Snaith of the University of Central Florida.

Twelve economists, or 30% of 40 respondents to the question, chose the euro as the most likely to decline in value over that same period. “The debt crisis still has more iterations to go, which will rattle currency markets,” said Diane Swonk of Mesirow Financial.

And the dollar? Eleven said they would bet the greenback will rise in value over the next three years and exactly the same number said they would bet on its value declining.

Just days ago HSBC Holdings PLC said earnings for 2010 doubled from a year earlier, to $13.2 billion, with Asia accounting for almost two-thirds of the profit. But Peter Wong, the bank's chief executive for Asia Pacific, is keen to stress the importance of cost control and measured growth.

Peter Wong says, "If I ever had the chance to write a book, it'd be about how to make complicated life simple."

Career: Joined Citibank in 1980 as an assistant financial controller. Moved to Standard Chartered in 1997 as head of consumer banking for China and Hong Kong. Joined HSBC in April 2005.

Education: educated at Indiana University. Has a bachelor's and MSc in computer science and an MBA in marketing and finance.

Extracurricular: Sports, especially playing golf. "Without sport I think I'd be dead already. Sport gives you a competitive sense."

On the financial crisis: "We [HSBC] were the first ones to come out and talk about subprime. Everybody thought we were smoking something. But later it came true."

China's foreign exchange regulator has refuted media reports that the country may lose up to $450 billion by holding bonds of Fannie Mae and Freddie Mac, the US mortgage giants.

The reports suggested that the US government might phase out the two companies. "The report is groundless," the State Administration of Foreign Exchange (SAFE) said in a statement published on its website on Friday, without referring to any specific media outlets.

The regulator said that it has been receiving regular payments of interest and principal on the bonds it holds in the two companies.

"Calculated in accordance with widely used indexes, from 2008 to 2010 the annual investment return on the debt was about 6 percent on average," the statement said.

China has never invested in the two companies' equities, and so it hasn't been affected by the decline in their stock prices, it added.

The administration reiterated that security is its top priority when making investments using the country's foreign reserves, and it has already taken appropriate measures to offset major potential risks.

China's central bank warned before the Lunar New Year break that it would focus on inflation, which has been forecast to top 5% in January. 

Inflation jitters spread through emerging markets on Tuesday, prompting China's central bank to raise interest rates for the third time in four months amid worries that a drought threatening the country's wheat crop will put further pressure on global food prices.

With fireworks still echoing from China's Lunar New Year holiday, its central bank said it is raising rates by one-quarter percentage point. It was just the latest move by an emerging-market government—several of which are deploying a panoply of policies to battle inflation fueled by rising food and commodity prices and growth that is threatening to outstrip their productive capacity.

In Brazil, Latin America's largest economy, the government reported Tuesday that inflation is accelerating, leading markets to expect its central bank to increase its overnight rate, already at 11.25%.