Friday April 29, 2005 - 10:55:57 GMT
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Black Swan Capital - www.blackswantrading.com
A dollar buying or selling opportunity?
“There is virtually no other human endeavor in which the lessons of history and failure seem to have so little impact as in the world of investing and financial markets.”
F.J. Chu, The Mind of the Market
The dollar dives on this “news.”
April 29 (Bloomberg) -- The yen climbed to a one-month high against the dollar and rose versus the euro after a newspaper in China, the biggest market for Japanese exports, said the government may let its currency trade more freely at any time.
BEIJING (AP) -- China does not plan to revalue its currency, the yuan, during next week's Labor Day holiday, a central bank spokesman said Friday, quashing rumors that such a change was imminent. "As far as we know, there's no adjustment expected in the yuan exchange rate," Bai Li, spokesman for the People's Bank of China, told Dow Jones Newswires.
Imminent revaluation rumors emanating from a state-owned Chinese newspaper! Is it simply another small bone being thrown to those calling for tariffs on the flood of Chinese goods still pouring into China’s top retail outlet--WalMart?
Can China really afford to allow enough freedom for its currency to make a difference in terms of trade?
This is an excerpt from a recent Stratfor.com analysis, forwarded to me by a friend:
“In December 2006, five years after China gained WTO membership, foreign banks will be allowed to fully compete in the Chinese banking sector. Currently, foreign access to China's financial world is thin, limited to only local currency transactions in 18 cities. But even this limited access has led to the formation of some 220 foreign bank offices in China and total business worth 108.3 billion yuan ($13 billion) at the end of 2004. These foreign banks already hold 12 percent of all lending business in Shanghai, a rate of increase that Shi [Vice-chairman of the China Banking Regulatory Commission] calls ‘unexpectedly [read: disturbingly] fast.’
“Full scale competition will mean the full scale evisceration of the Chinese banks. Since they subsidize their primary clients -- the SOEs [state owned enterprises]-- the state banks grant little to no interest to their depositors. Full competition would send Chinese money to the foreign banks in droves, and once foreign currency (read: U.S. dollar) operations are allowed, capital flight will reach mountainous proportions.
“China's choice is simple: Allow full competition and trigger social unrest on a scale that likely would destroy the government, or prevent that competition from happening and preserve the system.”
Does today’s “news” represent a dollar selling or buying opportunity?
I think that’s why they call this a market.
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