China U.S. Dollar Peg
Although it may not happen quickly, it looks like China has decided they're gradually going to remove the dollar peg with the renminbi, saying it was a temporary measure to deal with the economic crisis.
It's hard to tell if this is a consensus with the Chinese, or one faction making an assertion while the others are holding to a policy of needing a stable exchange rate between China and the U.S.
Confirmation from the Chinese government hasn't come yet after Zhou Xiaochuan, governor of the People’s Bank of China, made the comments of changing the peg sometime in the near future.
Of course when thinking of the Chinese, we must take into consideration their idea of what "near" means and what ours is. In this case, they seem to be thinking of a period of two to three years, tying it into the low levels of Chinese exports since the global economic crisis began.
China U.S. Dollar Peg
Showing posts with label China US Dollars. Show all posts
Showing posts with label China US Dollars. Show all posts
Sunday, March 7, 2010
Saturday, November 14, 2009
Countries Fighting Collapsing Dollar Value
A number of countries around the world are acquiring larger positions in the U.S. dollar in hopes it'll help shore up the plummenting value of the greenback to the detriment of their exports.
The most recent countries snatching up the dollar are Russia, South Korea, the Philippines and Thailand. The 15-month low of the U.S. dollar continues to raise concerns on slowing down any economic recovery because of exports from the countries having strong domestic U.S. competition because of the dollar's weakness.
Countries like Taiwan an Brazil are also concerned about the strength of their currencies against the dollar, and in the case of Taiwan they've now forbidden foreign investors from placing time deposits in the country in hopes of weakening their own currency. Comments from official in Brazil also imply there could be more action on taking steps to weaken the real.
In spite of rhetoric from Washington that they support a strong U.S. dollar, no steps have been taken to make that happen, and so it seems that's a direct nod to U.S. manufactures and unions who had backed Obama's presidential run. Exports from the U.S. increase when the U.S. dollar declines in value.
For now, China doesn't care whether the dollar rises or falls against the yuan because it's pegged to rise or fall against the dollar, keeping it at an even keel. Other countries have been pressuring China to allow the yuan to rise in value as Chinese exports also benefit from a weaker dollar as far as when competing against non-American exports.
With that in mind, there's no incentive for China to change its monetary policy, even though regional competitors complain about it. We might see some carrots thrown out to manage some of the complaints, but other than that, I don't see China making any drastic changes to their current monetary policy any time soon.
China holds all the cards in this economic battle, as if too much pressure is put on them, they could keep the import of goods from those particular nations at a small level, a major concern with the huge population in China and a solid, emerging middle class which will resume spending once the global economy rebounds.
Consequently, individual nations will have to take their own steps to make their currencies competitive, and not mistakenly wait around for some type of move by China.
For the U.S. dollar, it almost assuredly will continue to fall in value, making it even harder for other nations to compete on the international stage and with China for U.S. imports. Other nations as well are concerned, as the Euro continues to strengthen against the dollar, also making it harder for European nations to increase exports to the U.S.
The most recent countries snatching up the dollar are Russia, South Korea, the Philippines and Thailand. The 15-month low of the U.S. dollar continues to raise concerns on slowing down any economic recovery because of exports from the countries having strong domestic U.S. competition because of the dollar's weakness.
Countries like Taiwan an Brazil are also concerned about the strength of their currencies against the dollar, and in the case of Taiwan they've now forbidden foreign investors from placing time deposits in the country in hopes of weakening their own currency. Comments from official in Brazil also imply there could be more action on taking steps to weaken the real.
In spite of rhetoric from Washington that they support a strong U.S. dollar, no steps have been taken to make that happen, and so it seems that's a direct nod to U.S. manufactures and unions who had backed Obama's presidential run. Exports from the U.S. increase when the U.S. dollar declines in value.
For now, China doesn't care whether the dollar rises or falls against the yuan because it's pegged to rise or fall against the dollar, keeping it at an even keel. Other countries have been pressuring China to allow the yuan to rise in value as Chinese exports also benefit from a weaker dollar as far as when competing against non-American exports.
With that in mind, there's no incentive for China to change its monetary policy, even though regional competitors complain about it. We might see some carrots thrown out to manage some of the complaints, but other than that, I don't see China making any drastic changes to their current monetary policy any time soon.
China holds all the cards in this economic battle, as if too much pressure is put on them, they could keep the import of goods from those particular nations at a small level, a major concern with the huge population in China and a solid, emerging middle class which will resume spending once the global economy rebounds.
Consequently, individual nations will have to take their own steps to make their currencies competitive, and not mistakenly wait around for some type of move by China.
For the U.S. dollar, it almost assuredly will continue to fall in value, making it even harder for other nations to compete on the international stage and with China for U.S. imports. Other nations as well are concerned, as the Euro continues to strengthen against the dollar, also making it harder for European nations to increase exports to the U.S.
Monday, October 5, 2009
Oil Trading with U.S. Dollars? Not for long!
A number of nations have been getting together and discussing using a basket of currencies in place of the U.S. dollar to trade oil with one another.
Along with some Arab states, also participating in talks to stop using the U.S. dollar for trading oil are France, Russia Japan Brazil and China.
Evidently the deadline for all of this to transpire is 2018.
While publicly a number of countries and U.S. officials have talked about the importance of a strong U.S. dollar, that has largely become a joke privately, and we'll continually see a private push to move away from the U.S. dollar with the failed policies of the Obama administration, along with the continued actions and practices of the Federal Reserve.
This is why Ron Paul and so many others are moving so strongly to audit the Fed, and Paul's case - eventually end it altogether.
The U.S. dollar is collapsing all around us, and so-called financial experts, in many cases, continue to act as if it has a long life ahead. It may have, but it's going to continue to be on a respirator as its buying power continues to weaken.
We'll get some occasional spurts and upward movement of the dollar, as nothing falls straight off the cliff, but it will continually fall in strength endlessly unless our policies concerning the U.S. dollar change.
From the looks of it, very few have the will to make that decision, and so we'll go on until the pain of it forces the decision to be made. Hopefully by that time it won't be too late.
Along with some Arab states, also participating in talks to stop using the U.S. dollar for trading oil are France, Russia Japan Brazil and China.
Evidently the deadline for all of this to transpire is 2018.
While publicly a number of countries and U.S. officials have talked about the importance of a strong U.S. dollar, that has largely become a joke privately, and we'll continually see a private push to move away from the U.S. dollar with the failed policies of the Obama administration, along with the continued actions and practices of the Federal Reserve.
This is why Ron Paul and so many others are moving so strongly to audit the Fed, and Paul's case - eventually end it altogether.
The U.S. dollar is collapsing all around us, and so-called financial experts, in many cases, continue to act as if it has a long life ahead. It may have, but it's going to continue to be on a respirator as its buying power continues to weaken.
We'll get some occasional spurts and upward movement of the dollar, as nothing falls straight off the cliff, but it will continually fall in strength endlessly unless our policies concerning the U.S. dollar change.
From the looks of it, very few have the will to make that decision, and so we'll go on until the pain of it forces the decision to be made. Hopefully by that time it won't be too late.
Thursday, September 24, 2009
Julian Robertson: Betting on Inflation
One of the greatest hedge fund managers that has ever lived - Julian Robertson, said in a recent interview on CNBC that he was just about betting everything on the inevitable inflation, which will decimate the U.S. dollar.
He stated one of the key problems with the U.S. financial policy, and that is that it has led to complete dependence on China and Japan buying our debt if we are to economically survive, or at minimum, we'll face "severe economic problems."
"It's almost Armageddon if the Japanese and Chinese don't buy our debt,” Robertson said in the interview.
Concerning inflation, Robertson stated, “If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent. It's not a question of the economy. It's a question of who will lend us the money if they don't. Imagine us getting ourselves in a situation where we're totally dependent on those two countries. It's crazy.”
Roberston added that while the Chinese probably won't stop buying US bonds, it's quite possible the Japanese will, and sell their long-term bonds, which he said would be worse than someone not buying at all.
"The U.S. has to quit spending, cut back, start saving, and scale backward Robertson said. "Until that happens, I don't think we're anywhere near out of the woods.”
While Robertson said he thinks the recession is in a temporary lull, because so many of the financial problems haven't been dealt with, and the Federal Reserve hasn't stopped printing money, that could readily change.
He said it's impossible to pay back what we've borrowed, and the only change of that remotely happening is if the Chinese and Japanese continue to buy bonds from the U.S.
As a result, Robertson is betting a lot of his fortune on the fact that inflation will eventually come and soar, something all of us at minimum need to be financially defensive about.
He stated one of the key problems with the U.S. financial policy, and that is that it has led to complete dependence on China and Japan buying our debt if we are to economically survive, or at minimum, we'll face "severe economic problems."
"It's almost Armageddon if the Japanese and Chinese don't buy our debt,” Robertson said in the interview.
Concerning inflation, Robertson stated, “If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent. It's not a question of the economy. It's a question of who will lend us the money if they don't. Imagine us getting ourselves in a situation where we're totally dependent on those two countries. It's crazy.”
Roberston added that while the Chinese probably won't stop buying US bonds, it's quite possible the Japanese will, and sell their long-term bonds, which he said would be worse than someone not buying at all.
"The U.S. has to quit spending, cut back, start saving, and scale backward Robertson said. "Until that happens, I don't think we're anywhere near out of the woods.”
While Robertson said he thinks the recession is in a temporary lull, because so many of the financial problems haven't been dealt with, and the Federal Reserve hasn't stopped printing money, that could readily change.
He said it's impossible to pay back what we've borrowed, and the only change of that remotely happening is if the Chinese and Japanese continue to buy bonds from the U.S.
As a result, Robertson is betting a lot of his fortune on the fact that inflation will eventually come and soar, something all of us at minimum need to be financially defensive about.
Friday, July 17, 2009
China US Treasury Investment
China US Treasury investment
Investment in U.S. treasury bills seems safe at this time, as there are no better alternatives amid the global financial market instability, experts told Xinhua Friday after China substantially increased the holding in May. That should change soon, and China investment in US Treasuries could backfire big time.
China, with the world's largest foreign exchange reserves, or 2.13 trillion U.S. dollars, bought 38 billion U.S. dollars worth of the bills in May, the highest monthly increase in nine months. The holding was 801.5 billion U.S. dollars, according to the U.S. Treasury Department's website late Thursday.
"It is within expectation as the U.S. dollar's role in the international monetary system is irreplaceable in the short-run," said Ding Zhijie, deputy director of the School of Banking and Finance of the University of International Business and Economics.
China added 80.6 billion U.S. dollars of foreign reserves in May, according to the figure released by the People's Bank of China. It means 47 percent of the new reserves were used to buy the U.S. treasury bills.
Ding said there are no better investment alternatives as the global financial market was volatile in May. The U.S. economy posted a better performance than other major economies at the time.
Chinese officials have aired concerns that the falling U.S. dollar could hurt the value of China's massive holding of U.S. dollar assets.
The U.S. Treasury Secretary Timothy Geithner said that China's U.S. dollar assets are safe in his visit to China in June.
Chen Bingcai, researcher with the China National School of Administration, said China has been cutting long-term bills and buying more short-term bills to improve investment structure.
He said China does not have to worry too much about the issue alone, since it does no good for the U.S. economy if it relies too much on capital from China.
Wang Tao, a researcher with the China Minsheng Bank, said China still needs to diversify its investment mix to avert risks.
He said China should use the huge stockpile to buy strategic resources, and advanced technologies. He's right, and they need to do that quickly
China investment US Treasury
Investment in U.S. treasury bills seems safe at this time, as there are no better alternatives amid the global financial market instability, experts told Xinhua Friday after China substantially increased the holding in May. That should change soon, and China investment in US Treasuries could backfire big time.
China, with the world's largest foreign exchange reserves, or 2.13 trillion U.S. dollars, bought 38 billion U.S. dollars worth of the bills in May, the highest monthly increase in nine months. The holding was 801.5 billion U.S. dollars, according to the U.S. Treasury Department's website late Thursday.
"It is within expectation as the U.S. dollar's role in the international monetary system is irreplaceable in the short-run," said Ding Zhijie, deputy director of the School of Banking and Finance of the University of International Business and Economics.
China added 80.6 billion U.S. dollars of foreign reserves in May, according to the figure released by the People's Bank of China. It means 47 percent of the new reserves were used to buy the U.S. treasury bills.
Ding said there are no better investment alternatives as the global financial market was volatile in May. The U.S. economy posted a better performance than other major economies at the time.
Chinese officials have aired concerns that the falling U.S. dollar could hurt the value of China's massive holding of U.S. dollar assets.
The U.S. Treasury Secretary Timothy Geithner said that China's U.S. dollar assets are safe in his visit to China in June.
Chen Bingcai, researcher with the China National School of Administration, said China has been cutting long-term bills and buying more short-term bills to improve investment structure.
He said China does not have to worry too much about the issue alone, since it does no good for the U.S. economy if it relies too much on capital from China.
Wang Tao, a researcher with the China Minsheng Bank, said China still needs to diversify its investment mix to avert risks.
He said China should use the huge stockpile to buy strategic resources, and advanced technologies. He's right, and they need to do that quickly
China investment US Treasury
Wednesday, July 15, 2009
China's Risk with Dollar
China buying U.S. debt dollars Treasurys
Over the short term China will continue to buy up U.S. dollars in order to keep their export business thriving, but over the long term they're definitely taking steps to ensure they're not forced to be put into this position again.
China’s foreign-exchange reserves are growing again, aiding the Obama administration to sell extraordinary amounts of debt as it seeks to pull the world’s largest economy out of a recession.
Stockpiles of currency rose by a record $178 billion in the second quarter to top $2 trillion for the first time, the People’s Bank of China said recently. The numbers are close to two-thirds the size of China’s economy.
The cash holdings are increasing as the central bank sells its currency, the yuan, to try to stop an appreciation that would make the country’s exports more expensive. The yuan sales mean for all the calls by China and other emerging markets for an alternative to the dollar as the world’s reserve currency, it has little choice but to keep buying U.S. government assets.
“People are talking about whether the Chinese may actually one day dump the dollar and Treasuries because of the problem in the U.S., but they are missing the point,” said Stephen Jen, head of macroeconomics and currencies in London at BlueGold Capital LLP. “The reserves are so big because China needs to keep the exchange rate stable for its exports. Therefore, they have to keep buying dollar assets.”
To me, Jen misses the point. Just because over the short term the Chinese are buying U.S. dollar debt doesn't in any way deter the idea that they will have a policy of getting rid of the dollar over the long haul. As the dollar continues to plunge in value and inflation really takes hold, then we'll see what the Chinese will really do.
The need to balance gains in its currency led China, the largest global holder of U.S. Treasuries, to more than double its holdings of U.S. government notes and bonds in three years to $763.5 billion in April, according to U.S. Treasury data. The amount was equal to 38 percent of its reserves at the time.
Stimulus Spending
Barack Obama’s administration is trying to sell a record amount of debt to pay for measures to revive the U.S. economy. New York-based Goldman Sachs Group Inc. projects that government borrowing go as high as $3.25 trillion in the year ending Sept. 30, almost four times the $892 billion in 2008, to finance the budget deficit.
The reluctance to let the yuan appreciate when the world is mired in the deepest recession in six decades means that China will keep accumulating U.S. debt, even if the amount of its purchases declines, according to economists at RGE Monitor, a New York-based research firm headed by economist Nouriel Roubini.
“Despite China’s concerns about the value of its large stock of U.S. assets, reserve diversification will continue to be difficult."
Cash Surge
China’s reserves have grown by almost 14 times over the last 10 years as exports generated a trade surplus that pumped in cash. Capital Economics Ltd. estimates that exports will generate 30 percent of China’s growth this year.
Investors have also recently pushed cash into emerging markets such as China, amid signs that their economies will recover more quickly than those of developed nations.
Such investment inflows mean that “policy makers bought dollars and sold local currency in order to prevent currency appreciation. China will continue intervening to keep the yuan trading at about 6.83 per dollar through the end of this year.
Yuan’s Stability
The yuan’s value has barely changed in the past year, following a 21 percent appreciation in the three years after China scrapped its dollar peg in July 2005. The demand for dollars conflicts with China’s recent calls for the world to consider drawing away from the greenback as its sole reserve currency.
“As the Chinese were becoming more vocal in regard to the need to move away from the U.S. dollar, they were in actual fact buying more dollars than ever,” said Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd.
People’s Bank of China Governor Zhou Xiaochuan urged the International Monetary Fund in March to move toward creating a “super-sovereign reserve currency” to eventually replace the dollar. Premier Wen Jiabao said the same month that he was “worried” the dollar would weaken.
Speaking to Al-Arabiya television yesterday, U.S. Treasury Secretary Timothy Geithner expressed confidence that the dollar “will remain the principal reserve currency.”
Dollar Dominance
The dollar’s share of global foreign-exchange reserves increased to 65 percent in the first three months of this year, the most since 2007, according to the International Monetary Fund.
China is trying to reduce its reliance on the U.S. currency in other ways. It signed 650 billion yuan ($95 billion) of currency swaps this year with nations from Argentina to Belarus and is encouraging trading partners to use the yuan to settle cross-border trade.
The country’s top currency regulator this week relaxed curbs on overseas investment by local businesses, allowing more funds to flow abroad starting Aug. 1.
The 21.4 percent drop in net exports in June from a year earlier means “the yuan is stuck in cement until the middle of next year at least."
“The reserves will continue to pile up,” said Zhu Baoliang, chief economist of China’s State Information Center, an affiliate of the National Development and Reform Commission, the nation’s top economic planning agency. “Over the short term, there is not much that China can do but continue to buy U.S. Treasuries while hoping that the U.S. economy can recover as soon as possible so that China’s investment won’t suffer too much loss.”
However you want to communicate this, China over the long term will continue to diversify and not allow its currency and postion to be so dependent on the U.S. dollar. For now they'll continue to buy, but already they're taking steps to eliminate the inherent risks and very real threat of owning U.S. dollars.
China buying U.S. debt dollars Treasury's
Over the short term China will continue to buy up U.S. dollars in order to keep their export business thriving, but over the long term they're definitely taking steps to ensure they're not forced to be put into this position again.
China’s foreign-exchange reserves are growing again, aiding the Obama administration to sell extraordinary amounts of debt as it seeks to pull the world’s largest economy out of a recession.
Stockpiles of currency rose by a record $178 billion in the second quarter to top $2 trillion for the first time, the People’s Bank of China said recently. The numbers are close to two-thirds the size of China’s economy.
The cash holdings are increasing as the central bank sells its currency, the yuan, to try to stop an appreciation that would make the country’s exports more expensive. The yuan sales mean for all the calls by China and other emerging markets for an alternative to the dollar as the world’s reserve currency, it has little choice but to keep buying U.S. government assets.
“People are talking about whether the Chinese may actually one day dump the dollar and Treasuries because of the problem in the U.S., but they are missing the point,” said Stephen Jen, head of macroeconomics and currencies in London at BlueGold Capital LLP. “The reserves are so big because China needs to keep the exchange rate stable for its exports. Therefore, they have to keep buying dollar assets.”
To me, Jen misses the point. Just because over the short term the Chinese are buying U.S. dollar debt doesn't in any way deter the idea that they will have a policy of getting rid of the dollar over the long haul. As the dollar continues to plunge in value and inflation really takes hold, then we'll see what the Chinese will really do.
The need to balance gains in its currency led China, the largest global holder of U.S. Treasuries, to more than double its holdings of U.S. government notes and bonds in three years to $763.5 billion in April, according to U.S. Treasury data. The amount was equal to 38 percent of its reserves at the time.
Stimulus Spending
Barack Obama’s administration is trying to sell a record amount of debt to pay for measures to revive the U.S. economy. New York-based Goldman Sachs Group Inc. projects that government borrowing go as high as $3.25 trillion in the year ending Sept. 30, almost four times the $892 billion in 2008, to finance the budget deficit.
The reluctance to let the yuan appreciate when the world is mired in the deepest recession in six decades means that China will keep accumulating U.S. debt, even if the amount of its purchases declines, according to economists at RGE Monitor, a New York-based research firm headed by economist Nouriel Roubini.
“Despite China’s concerns about the value of its large stock of U.S. assets, reserve diversification will continue to be difficult."
Cash Surge
China’s reserves have grown by almost 14 times over the last 10 years as exports generated a trade surplus that pumped in cash. Capital Economics Ltd. estimates that exports will generate 30 percent of China’s growth this year.
Investors have also recently pushed cash into emerging markets such as China, amid signs that their economies will recover more quickly than those of developed nations.
Such investment inflows mean that “policy makers bought dollars and sold local currency in order to prevent currency appreciation. China will continue intervening to keep the yuan trading at about 6.83 per dollar through the end of this year.
Yuan’s Stability
The yuan’s value has barely changed in the past year, following a 21 percent appreciation in the three years after China scrapped its dollar peg in July 2005. The demand for dollars conflicts with China’s recent calls for the world to consider drawing away from the greenback as its sole reserve currency.
“As the Chinese were becoming more vocal in regard to the need to move away from the U.S. dollar, they were in actual fact buying more dollars than ever,” said Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd.
People’s Bank of China Governor Zhou Xiaochuan urged the International Monetary Fund in March to move toward creating a “super-sovereign reserve currency” to eventually replace the dollar. Premier Wen Jiabao said the same month that he was “worried” the dollar would weaken.
Speaking to Al-Arabiya television yesterday, U.S. Treasury Secretary Timothy Geithner expressed confidence that the dollar “will remain the principal reserve currency.”
Dollar Dominance
The dollar’s share of global foreign-exchange reserves increased to 65 percent in the first three months of this year, the most since 2007, according to the International Monetary Fund.
China is trying to reduce its reliance on the U.S. currency in other ways. It signed 650 billion yuan ($95 billion) of currency swaps this year with nations from Argentina to Belarus and is encouraging trading partners to use the yuan to settle cross-border trade.
The country’s top currency regulator this week relaxed curbs on overseas investment by local businesses, allowing more funds to flow abroad starting Aug. 1.
The 21.4 percent drop in net exports in June from a year earlier means “the yuan is stuck in cement until the middle of next year at least."
“The reserves will continue to pile up,” said Zhu Baoliang, chief economist of China’s State Information Center, an affiliate of the National Development and Reform Commission, the nation’s top economic planning agency. “Over the short term, there is not much that China can do but continue to buy U.S. Treasuries while hoping that the U.S. economy can recover as soon as possible so that China’s investment won’t suffer too much loss.”
However you want to communicate this, China over the long term will continue to diversify and not allow its currency and postion to be so dependent on the U.S. dollar. For now they'll continue to buy, but already they're taking steps to eliminate the inherent risks and very real threat of owning U.S. dollars.
China buying U.S. debt dollars Treasury's
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