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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (22303)	1/27/2005 7:25:44 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

My guess is to sell some US debt and diversify more of its reserve. No, I don't think China will buy more US debt, already got too much of them<G>. Not to mention, how could China support the US$ with its small $1.4 trillion economy if Euro and Japan cannot do it? BTW, I saw Jay wrote a new piece on his blog site: worldmarket.blogspot.com And Marc Faber has mentioned as early as last Sept. that China started to buy Gold<g> worldmarket.blogspot.com

To: mishedlo who wrote (22303)	1/27/2005 7:26:21 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Talk of Currency Basket Dampens Yuan Speculation Thu Jan 27, 2005 11:34 AM ET By Sabyasachi Mitra LONDON (Reuters) - Prospects of an imminent revaluation of the Chinese yuan currency are ebbing as the debate now focuses on whether Beijing would first seek to swap its dollar peg for a currency basket. As China's faith in the dollar wavers, analysts say Beijing may move first to link the yuan to a basket of currencies comprising mainly the euro, yen, dollar and currencies of other main trading partners. This view got a boost after Fan Gang, Director at the National Economic Research Institute, said the issue for China was not was not revaluation "but de-linking or de-pegging." "The U.S. dollar is no longer a stable currency," Fan told the World Economic Forum at Davos. "The real issue is how to change the regime to a managed, floating and more flexible one referenced to a diversified basket of currencies -- the euro, the yen, the dollar." The dollar's steady decline in the past three years along with America's yawning current account deficit has spurred many economies to explore possibilities of rebalancing their foreign reserves through diversification, mainly into the euro. Fan's comments before next week's London meeting of the Group of Seven industrialized nations dampened market speculation about a yuan revaluation during the Chinese New Year holiday next month. Chinese finance officials have said they are going to discuss the yuan with their Western counterparts at the G7 meeting as the Europeans along with Washington stepped up calls for a flexible currency. The United States and others have pressed Beijing to allow the yuan, which is pegged near 8.28 to the dollar, to move freely, saying the current level is artificially weak and gives Chinese exports an unfair advantage on global markets. China has promised to move gradually to a flexible currency, but stressed conditions such as the need for a healthy financial system and economic stability have to be met first. Earlier this week, intense speculation over yuan revaluation had pushed the yuan premium in offshore non-deliverable forwards, derivatives used to speculate on currencies, to over 4,100 points for over one year. It's now down to 4,000 points. The implied appreciation in a year's time is about five percent. Continued ... © Reuters 2005. All Rights Reserved. reuters.com