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Archive for the ‘China’ Category

shaysworthy1.jpg Today in the daily audio FX we break down the essentials of the Bank geeks testimonies to tradeable action and information. We discuss the intermarket relationships of pumping liquidity into the U.S. markets, did the BOE really hold rates – do you need more reason to short the GBP? China – the latest government that thinks they can fix commodity prices, which historically speaking spells disaster.

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dollarsmoking.jpg A student emailed in and asked:

Hey Michael – I was just curious, why did the $DXY take such a dive yesterday? I’m still trying to keep straight what moves with/leads/follows what.

The $DXY is the dollar index. Basically, an average price of the dollar versus many major currencies, not just the euro, pound, etc. It’s just another way of looking at the dollar, but broader. Here was my reply, so here’s a heads up on the buck this morning:

The big one was that a Chinese politician said some USD negative comments last night. They were to the effect that China needs to get the heck out of the dollar.

Also I think I read somewhere that the Fed’s Lacker was more dovish in the last voting than people anticipated, a ratings agency downgraded U.S. bond insurers which causes a fresh wave of financial panic and there was a news article today that said George Soros (famous money manager) and Alan Greenspan said that the U.S. is in a worse position that the Fed will admit.

To read more of this story of the dollar debacle, the latest in a series and of more to come, read here. That sweet tinder smell you smell is the dollar going up in smoke.

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If you read one thing this week to further your FX education here it is: the latest comments from money manager and commodities guru Jim Rogers. The man is amazing and very highly respected. I read his book Hot Commodities and it was great, the real deal, not some fluff. I’ll add it to our book list above sometime.

Here is the link, courtesy Bloomberg:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7Yy4VHfagTQ

Some snippets:

“The U.S. dollar is and has been the world’s reserve currency, the world’s medium of exchange,” he said. “That’s in the process of changing. The pound sterling, which used to be the world’s reserve currency, lost 80 percent of its value, top to bottom, as it went through the whole period of losing its status as the world’s reserve currency.”

Rogers said he remains bullish on commodities because “that’s where the big fortunes are going to be made in the world in the next five, or 10 or 15 years. The current bull market is going to last until sometime between 2014 and 2022.”

The carry trades in yen and francs will “unwind someday,” which will send the currencies “straight up,” Rogers said.

China, growing faster than any other major economy, is “going to be the most important country in the 21st century,” he said. China’s gross domestic product expanded 11.9 percent in the second quarter.

And here is some interesting, related data about the USD, euro and long-term international reserve diversification which I pulled from the IMF’s website (think about this in context of the EUR/USD and the flag break we just watched – we were on this here and here!:

num0912a-1.gif

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I’m going to make this real easy: forget the G7 meeting and brace yourselves, it’s all about what U.S. stocks started on Friday (well, days before that but things really heated up Friday).

But in case you’re still worried, here’s what happened over the weekend when financial officials for the G7 nations met:

 

  • China was put on warning by the group to shift gears and get the Yuan worth more
  • The group said its economies are healthy like bull (this doesn’t mean that prices may not be higher than this warrants for a currency or stocks, though)
  • Concern for USD devaluation was reiterated after the meeting, and it was noted that a strong dollar is “in everybody’s best interest”.
  • They reminded investors to be careful of “one way bets”.

They did not get into pressuring the euro down or the buck up. This is disappointing to traders wanting a pause in some of the trends happening. But it all comes back to a moot point with the bigger fish to fry: stocks led weakness …

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China muscles into forex

Check this out from China Economic Net:

 

China Investment Corporate Ltd. (CIC), the country’s long-awaited state forex investment company set up to make better use of its huge foreign exchange reserve, was inaugurated on Saturday.

The CIC, with a registered capital of 200 billion U.S. dollars, is a solely state-owned company, according to the company sources.

The government is setting up the company to help increase the returns on the country’s forex investments, currently mostly parked in US-dollar assets.

Let’s think about this. $200 billion USD cash reserves they are going to be more “active” in. Dollar is going down. Hmm. Doesn’t sound like a good time to be a buck.

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