China Sells Dollars
Courtesy of our valued member Steve Bishop.
Reuters reported important statements by Zhou Xiaochuan, governor of the People’s Bank of China. He was interviewed this morning at a central bankers conference in Frankfurt. Apparently, Zhou said, "All central banks are trying to diversify. …We have had a very clear diversification plan for several years."
Miller Tabak & Co estimates that China now has over $1 trillion in foreign exchange reserves. Apparently, some $700 billion of these are held in U.S. dollars or dollar-denominated securities. The U.S. dollar came under immediate selling pressure.
Brian Dollan, research director at Forex.com, a unit of the currency-trading firm Gain Capital of New Jersey said, "The prime beneficiaries will be the euro, yen, pound and the Australian dollar." (Interestingly, the last two mentioned have just raised their interest rates.) As far as America is concerned, a weak dollar is inflationary in the medium-term. A weak dollar, in itself, could therefore lead to an increase in U.S. interest rates, as we have forecast, to stem inflation just when a recession looms.
The stagflation we have warned of may be nearer at hand that even we had thought.
Reuters reported important statements by Zhou Xiaochuan, governor of the People’s Bank of China. He was interviewed this morning at a central bankers conference in Frankfurt. Apparently, Zhou said, "All central banks are trying to diversify. …We have had a very clear diversification plan for several years."
Miller Tabak & Co estimates that China now has over $1 trillion in foreign exchange reserves. Apparently, some $700 billion of these are held in U.S. dollars or dollar-denominated securities. The U.S. dollar came under immediate selling pressure.
Brian Dollan, research director at Forex.com, a unit of the currency-trading firm Gain Capital of New Jersey said, "The prime beneficiaries will be the euro, yen, pound and the Australian dollar." (Interestingly, the last two mentioned have just raised their interest rates.) As far as America is concerned, a weak dollar is inflationary in the medium-term. A weak dollar, in itself, could therefore lead to an increase in U.S. interest rates, as we have forecast, to stem inflation just when a recession looms.
The stagflation we have warned of may be nearer at hand that even we had thought.
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