WHAT COULD GO WRONG? Senate votes 79-19 to move bill punishing China on currency.

Well, here’s one take on what could go wrong: China Fires Back At US Senate Which May Have Just Started The Sino-US Currency Wars.

UPDATE: A hedge-fund reader emails: “Actually, the Chinese have been nudging their currency irregularly higher for quite a while. It’s in their interest to do so now, given their internal inflation problem. The Yuan has weakened vs. the Dollar in the last couple of weeks, but that’s due entirely to the financial crisis and a flight to currencies seen as safe. US politicians are entirely deaf to the risk they’re pouring gasoline on the world’s financial infrastructure by provoking a needless currency war at the worst possible time.”

Well, that would be par for the course.