Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
WEALTH INEQUALITY WASN'T BY HAPPENSTANCE! - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China's Currency War in the Eurozone to Devalue U.S. Dollar

Currencies / Market Manipulation Oct 08, 2010 - 05:41 AM GMT

By: Pravda

Currencies

Best Financial Markets Analysis ArticleThe market structure of the rates of foreign currencies has been thrown into question. China has become more active in the eurozone as a result of the economic conflict with the USA. The Chinese dragon starts to determine quotations on world's basic currencies, such as the euro and the US dollar.


Premier Wen Jiabao of China stated during the meeting with the head of the Greek government George Papandreou that China had purchased long-term bonds, issued by Greece to cover its sovereign debt. Beijing, the Chinese official said, was determined to continue purchasing the bonds if Athens needed new loans to settle its huge budget deficit. Several days before that, the lower house of the US Congress approved the bill targeted against the lowered rate of the Chinese currency vs. the US dollar.

The Chinese premier also said that his nation would continue to support the countries of the eurozone that help Greece in overcoming the financial crisis. The official also said that China was intended to double imports from Greece.

The statement from the Chinese premier resulted in the growth of the European currency on the market. One euro is now traded at 1,376 USD, which marked a record since March of the current year. The euro has gained 8.1 percent vs. the dollar and 7.8 percent vs. the yen since September 10. Thus, the euro has grown considerably over a very short period of time.

As a matter of fact, there are no objective factors for such dynamics of the euro. The real state of affairs is absolutely different. Moody's lowered Spain's rating to Aa1 from Aaa at the time when Dublin said that Ireland would need 50 billion euros (a third of the nation's GDP) to rescue the national banking system. One should also bear in mind the high unemployment level in the European Union.

As a result, Forex currently considers the euro as a real investment alternative to gold, which set another traditional price record last week.

Indeed, money work miracles. Big money work big miracles. China holds largest gold and currency reserves in the world, but its determination to support the European currency may only seem to be a manifestation of good will at first sight.

The assets of the National Bank of the People's Republic of China exceed 2.5 trillion dollars. It's an absolutely natural wish for Beijing to diversify the reserves against the background of Washington's enormous state debt and the pressure that it shows on the quotations of the American currency.

Chinese financial experts acknowledge that the level of the US debt is a highly negative factor. Any growth of the American currency is temporal, analysts say, claiming that the devaluation of the dollar is inevitable. That is why China cut its assets in US bonds by 10 percent from July 2009 to July 2010, to 846.7 billion dollars.

The euro is the only alternative to the US dollar in the foreseeable future. Purchasing European state bonds becomes an obvious decision. The critical condition of the economies of Portugal, Ireland, Spain and Greece (PIGS) makes the entrance to the euro market relatively inexpensive and attractive both financially and politically. EU countries will not hamper the Chinese expansion against such a background.

The Chinese resort to the tactics which they have already practiced in South East Asia and in Africa, where they purchased cheap troubled assets without any conditions. However, it currently goes about the European Union, which is world's second largest economy. Thus, China is willing to take this opportunity to demonstrate its global ambitions to the United States.

Last week, the US Congress approved the bill stipulating economic sanctions against the countries that orchestrate manipulations with national currencies. It is easy to guess that the bill targets China first and foremost.

The US administration is certain that the Chinese National Bank manipulates the national currency to create unjustifiable competitive advantages for Chinese exporters. As soon as Chinese goods reach more markets, including the US one, the unemployment level in the United States grows. The high dollar rate against the yuan makes US goods in China too expensive, and American companies lose the enormous Chinese market with over a billion consumers.

Washington believes that it would be reasonable to increase the yuan rate by at least 20 percent during upcoming two years. However, premier Wen Jiabao stated that China would never agree for such an adventure. If only it happened, China would be shattered with a massive social and economic crisis, the official said.

Beijing is perfectly aware of the fact that offense is the best defense.

Sergey Podosenov

Pravda.ru

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Pravda Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in