This week's devaluation in the Chinese currency prompted howls of protest from politicians on both left and right in the United States, while the Alliance for American Manufacturing said Beijing had manipulated its currency in a way that would undermine the U.S. economic recovery.

But as calm returns to financial markets on Friday, some context bears remembering.

In the past decade, the Chinese yuan has strengthened by more than 25 percent against the dollar.

(The falling line in the graph above shows a falling dollar and a strengthening yuan). This week’s devaluation (of more than four percent) was pretty insignificant from that perspective.

Over the same period, China's "real broad effective exchange rate," as measured by the Bank for International Settlements, has risen even more sharply -- by more than 50 percent.

That helps to explain why the International Monetary Fund said in May that the Chinese currency was no longer undervalued, and why other experts believe it is now overvalued. It also helps to explain why China's economic managers might have wanted to engineer something of a correction.

So if this week's move was merely a smallish correction in an overvalued currency, why all the hyperbolic talk of a currency war?

The reasons lie elsewhere, and in particular how Europe and Japan have encouraged their currencies to weaken in a bid to stimulate growth. This chart shows the euro’s near 20 percent decline against the dollar since May 2014.

It is a similar story for the Japanese yen: The Japanese currency has lost a third of its value against the dollar in the past three years.

The next question is whether this matters for the United States.

This chart, from the St Louis Fed, shows how the trade-weighted dollar has risen in value sharply in the past year (by roughly 16 percent in 13 months), thanks in part to weakness in the euro and yen. This is a certainly a matter of concern for the United States, but so far, this ramp-up in the dollar's value does not appear to have derailed the U.S. economic recovery.

Now look a little more closely at this Bloomberg chart of their trade-weighted dollar index (I recommend clicking on the one-month time-frame), and you can see that the trade-weighted dollar has actually fallen this week. An upward adjustment to the trade-weighted dollar because of the yuan's decline was more than canceled out by the dollar’s decline against other currencies. (Thanks to Charles Dumas of Lombard Street Research for pointing this out). You have to conclude that there is no reason to reach for the panic button just yet.

Obviously, things could change were China to engineer a much more substantial devaluation of its currency against the dollar, and if other countries then felt the need to follow suit. But for now, the People’s Bank of China seems to be holding the line through market intervention (it actually fixed the yuan's central rate marginally higher Friday morning after three days of declines).

Arguably, all we have seen this week is a small correction in an overvalued currency, which has had no net effect on U.S. competitiveness.

The finger pointing could say more about the deteriorating state of U.S.-Chinese relations -- and about the people who are pointing those fingers -- than it does about what really actually occurred.

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