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Strategies & Market Trends : Currents of Currency

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From: The Wharf	10/28/2004 12:40:19 PM
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CBS MarketWatch U.S. stocks open lower on China worries Thursday October 28, 9:52 am ET By Susan Lerner NEW YORK (CBS.MW) - U.S. stocks opened lower guard and guard your own Thursday morning as news that China's central bank raised its benchmark interest rate for the first time in nine years sparked worries about demand for commodities. Investment imitative that can come back to haunt you. The US$ declining value in the world market place created added value attraction to the Rembi . This led to over enthusiastic investment which appears to be creating inflation. You can't guard your own currency value when you are using someone else's currency to value your own. China has been saying I trust your financial strength however if you go down the tubes so will I. Very difficult to adjust for what your neighbor will do when you use their balance sheet multiply is by eight to come up with some sort of value of your own. The decrease in world markets eyes of the value of the US$ increased the profit potential for other currencies and China faces the possibility of being over built too fast too soon. One can look at this from an extreme where in the present situation if the Euro doubled in value to the US$ the Yuan has been reduced by half. If the US triples in value China finds her products are starting to look costly for other nations. China is attempting to solve inflation with interest rates. The problem is currency not rates and coupled with low labor costs it is very hard for her to avoid inflation. When your currency is not valued as a unit in the currency market your faith is hinged to another dollar. It is my belief for China's own peoples well being she has to unpeg. It is her belief however that she can raise rates increase the cost of her new growth and in that process decrease her own Mom and Pop's internal growth rate. China is not a wealthy nation she needs self growth yet she is harming her internal people growth rate with this move. If China's wants to have a strong nation she must unpeg.

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