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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (66499)	7/22/2005 2:36:36 AM
From: Taikun	Read Replies (1) \| Respond to of 74559

TJ, I still find this interesting: "The RMB will likely be 're-pegged' to a basket of currencies in relation to trade volume and such, and perhaps re-valued upward by 5%, all within the next 6 months, but then, given China's needs, RMB may then suffer from devaluation tendencies;" Trade volume can be defined several ways. I wonder if this is one of the reasons for Singapore's secret basket? Trade volume in USD is obviously larger than trade volume with the US, but trade volume with US multinationals is probably somewhere between the two. If you're buying 75% of your imports in USD but only 25% of your basket is USD, because you do a geographical weighting, then do you start to have a hard time managing your currency? In addition, China seems to be building up her military. In this case, whether you want Raytheon or MBDA to be your missile supplier will drive your holdings of USD vs Euro. Ultimately, the currency basket will need to become secret. If RMB crashes, isn't it conceivable USD becomes a huge part of basket assuming: most commodities in USD much trade with USD multinationals demand for USD-denominated arms IOW, did we just witness a non-event? The real event is that the process has started, but for the time being I see: Yen off its highs Bank of Korea trying to drive down Won Malaysia will earn less Ringgitt for their commodity exports (rubber, wood, oil) The basket China has created shifts the burden of managing the USD onto the other Asian currencies. Korea is already doing some heavy lifting! If Korean Won is in RMB basket and Korea drives Won lower vs USD, then Won in basket is virtual proxy for USD. If Yen is added to basket and BOJ buys dollars to weaken Yen then Yen in basket is proxy for USD. Any replacement of USD with Asian export currencies is close proxy for USD. The likelihood of canceling each other out is high. The interesting piece is the Euro/other currency piece. But, who really wants to hold Euro? Or another currency? Euro is probably not better than USD fundamentally. And, do you hold Euro in excess of the Euro-denominated trade for strategic (eg In case Beijing wants to buy 300 Exocets) purposes? D