Livingston nh 11:53 GMT September 8, 2010 What Bernanke Doesn't Understand - Mauldin's Outside the Box E-letter:
Reply JP - I agree with the author's opinion of economists that commit to a belief system in an imprecise area of human endeavor similar to theology and his assault on perceived wisdom // The growth of debt has been a significant phenomenon in the US - But I've tried a couple of ways to integrate the author's additive of private debt in order to better approximate "aggregate demand" and I keep coming up with double counting - It appears to me that the debt he describes is incorporated in either the C (consumption) or I (investment) in the basic GDP formulation - much of the debt in both the private and public sector has been "lifestyle maintenance", i.e., Consumption - the balance of the debt would be Investment - hence adding the debt to GDP may not be valid
I also have a problem with the Inflation concept once he introduces assets because inflation includes aggregate supply as well as aggregate demand - it's why most CB types can't see bubbles - they operate on a variation of the Real Bills Doctrine - but the inflation factor is a mere niggle in the author's proposal because I can't past the apparent "double counting"
Mtl JP 00:46 GMT September 7, 2010 What Bernanke Doesn't Understand - Mauldin's Outside the Box E-letter:
Reply What Bernanke Doesn't Understand
By Steve Keen
Bernanke’s recent Jackson Hole speech didn’t contain one reference to the key force driving the American economy right now: private sector deleveraging (here’s the previous year’s speech for comparison’s sake). The reason the US economy is not recovering from this crisis is because all sectors of American society took on too much debt during the false boom of the last two decades, and they are now busily getting themselves out of debt any way they can.
Debt reduction is now the real story of the American economy, just as real story behind the apparent free lunch of the last two decades was rising debt. The secret that has completely eluded Bernanke is that aggregate demand is the sum of GDP plus the change in debt. So when debt is rising demand exceeds what it could be on the basis of earned incomes alone, and when debt is falling the opposite happens.
I’ve been banging the drum on this for years now, but it’s a hard idea to communicate because it’s so alien to the way most economists (and many people) think. For a start, it involves a redefinition of aggregate demand. Most economists are conditioned to think of commodity markets and asset markets as two separate spheres, but my definition lumps them together: aggregate demand is the sum of expenditure on goods and services, PLUS the net amount of money spent buying assets (shares and property) on the secondary markets. This expenditure is financed by the sum of what we earn from productive activities (largely wages and profits) PLUS the change in our debt levels. So total demand in the economy is the sum of GDP plus the change in debt.
I’ve recently developed a simple numerical example that makes this case easier to understand: imagine an economy with a nominal GDP of $1,000 billion which is growing at 10 percent a year, due to an inflation rate of 5 percent and a real growth rate of 5 percent, and in which private debt is $1,250 billion and is growing at 20% a year.
Aggregate private sector demand in this economy—expenditure on all markets, including asset markets—is therefore $1,250 billion: $1,000 billion from expenditure from income (GDP) and $250 billion from the change in debt. At the end of the year, private debt will be $1,500 billion. Expenditure is thus 20 percent above the level that could be financed by income alone.
Now imagine that the following year, the rate of growth of GDP continues at 10 percent, but the rate of growth of debt slows from 20 to 10 percent. GDP will have grown to $1,100 billion, while the increase in private debt this year will be $150 billion—10 percent of the initial $1,500 billion total and therefore $100 billion less than the $250 billion increase the year before.
Aggregate private sector demand in this economy will therefore be $1,250 billion, consisting of $1,100 billion from GDP and $150 billion from rising debt—exactly the same as the year before. But since inflation has been running at 5 percent, aggregate demand will be 5 percent lower than the year before in real terms. So simply stabilising the debt to GDP ratio results in a fall in demand in real terms, and some markets—commodities and/or assets—must take a hit.
Putting this example in a table, we get the following illustration: Variable/Year
Year 1
Year 2
Nominal GDP
1000
1100
Growth rate of Nominal GDP
10%
10%
Real growth rate
5%
5%
Inflation Rate
5%
5%
Private Debt
1250
1500
Growth rate of Private Debt
20%
10%
Change in Private Debt
250
150
Nominal Aggregate demand (GDP + Change in Debt)
1250
1250
Notice that nominal aggregate demand remains constant across the two years–but this means that real output has to fall, since half of the recorded growth in nominal GDP is inflation. So even stabilising the debt to GDP ratio causes a fall in real aggregate demand. Some markets–whether they’re for goods and services or assets like shares and property–have to take a hit.
Now let’s apply this to the US economy for the last few years, in somewhat more detail. There are some rough edges to the following table—the year to year changes put some figures out of whack, and some change in debt is simply compounding of unpaid interest that doesn’t add to aggregate demand—but in the spirit of “I’d rather be roughly right than precisely wrong”, at your leisure please work your way through the table below.
Its key point can be grasped just by considering the GDP and the change in debt for the two years 2008 and 2010: in 2007-2008, GDP was $14.3 trillion while the change in private sector debt was $4 trillion, so aggregate private sector demand was $18.3 trillion. In calendar year 2009-10, GDP was $14.5 trillion, but the change in debt was minus $1.9 trillion, so that aggregate private sector demand was $12.6 trillion. The turnaround in two years in the change of debt has literally sucked almost $6 trillion out of the US economy. VariableYear
2006
2007
2008
2009
2010
GDP
12,915,600
13,611,500
14,337,900
14,347,300
14,453,800
Change in Debt
2,914,187
3,356,568
4,043,201
1,448,895
-1,859,505
GDP + Change in Private Debt
15,829,787
16,968,068
18,381,101
15,796,195
12,594,295
Change in Private Aggregate Demand
0.0%
7.2%
8.3%
-14.1%
-20.3%
Government Debt
6,556,391.0
6,893,467.0
7,321,592.0
8,615,051.0
10,167,585.0
Change in Government Debt
478,851.0
337,076.0
428,125.0
1,293,459.0
1,552,534.0
GDP + Change in Total Debt
16,308,638.0
17,305,144.0
18,809,226.0
17,089,654.0
14,146,829.0
Change in Total Aggregate Demand
0.0%
6.1%
8.7%
-9.1%
-17.2%
That sucking sound will continue for many years, because the level of debt that was racked up under Bernanke’s watch, and that of his predecessor Alan Greenspan, was truly enormous. In the years from 1987, when Greenspan first rescued the financial system from its own follies, till 2009 when the US hit Peak Debt, the US private sector added $34 trillion in debt. Over the same period, the USA’s nominal GDP grew by a mere $9 trillion.
Ignoring this growth in debt—championing it even in the belief that the financial sector was being clever when in fact it was running a disguised Ponzi Scheme—was the greatest failing of the Federal Reserve and its many counterparts around the world.
Though this might beggar belief, there is nothing sinister in Bernanke’s failure to realize this: it’s a failing that he shares in common with the vast majority of economists. His problem is the theory he learnt in high school and university that he thought was simply “economics”—as if it was the only way one could think about how the economy operated. In reality, it was “Neoclassical economics”, which is just one of the many schools of thought within economics. In the same way that Christianity is not the only religion in the world, there are other schools of thought in economics. And just as different religions have different beliefs, so too do schools of thought within economics—only economists tend to call their beliefs “assumptions” because this sounds more scientific than “beliefs”.
Let’s call a spade a spade: two of the key beliefs of the Neoclassical school of thought are now coming to haunt Bernanke—because they are false. These are that the economy is (almost) always in equilibrium, and that private debt doesn’t matter.
One of Bernanke’s predecessors who also once believed these two things was Irving Fisher, and just like Bernanke, he was originally utterly flummoxed when the US economy collapsed from prosperity to Depression back in 1930. But ultimately he came around to a different way of thinking that he christened “The Debt Deflation Theory of Great Depressions” (Fisher 1933).
You would think Bernanke, as the alleged expert on the Great Depression—after all, that’s one of the main reasons he got the job as Chairman of the Federal Reserve—had read Fisher’s papers. And you’d be right. But the problem is that he didn’t understand them—and here we come back to the belief problem. The Great Depression forced Fisher—who was also a Neoclassical economist—to realize that the belief that the economy was always in equilibrium was false. When Bernanke read Fisher, he completely failed to grasp this point. Just as a religious scholar from, for example, the Hindu tradition might completely miss the key points in the Christian Bible, Bernanke didn’t even register how important abandoning the belief in equilibrium was to Fisher.
To know this, all you have to do is read Bernanke’s summary of Fisher in his Essays on the Great Depression:
The idea of debt-deflation goes back to Irving Fisher (1933). Fisher envisioned a dynamic process in which falling asset and commodity prices created pressure on nominal debtors, forcing them into distress sales of assets, which in turn led to further price declines and financial difficulties. His diagnosis led him to urge President Roosevelt to subordinate exchange-rate considerations to the need for reflation, advice that (ultimately) FDR followed.
Fisher’s idea was less influential in academic circles, though, because of the counterargument that debt-deflation represented no more than a redistribution from one group (debtors) to another (creditors). Absent implausibly large differences in marginal spending propensities among the groups, it was suggested, pure redistributions should have no significant macroeconomic effects. ” (Bernanke 2000, p. 24)
There’s no mention of disequilibrium there, and though Bernanke went on to try to develop the concept of debt-deflation, he did so while maintaining the belief in equilibrium. Compare this to Fisher himself on how important disequilibrium really is in the real world:
We may tentatively assume that, ordinarily and within wide limits, all, or almost all, economic variables tend, in a general way, toward a stable equilibrium… But the exact equilibrium thus sought is seldom reached and never long maintained. New disturbances are, humanly speaking, sure to occur, so that, in actual fact, any variable is almost always above or below the ideal equilibrium…
It is as absurd to assume that, for any long period of time, the variables in the economic organization, or any part of them, will “stay put,” in perfect equilibrium, as to assume that the Atlantic Ocean can ever be without a wave. ( Fisher 1933, p. 339)
We might not be in such a pickle now if economics had started to become more of a science and less of a religion by following Fisher’s lead, and abandoning key beliefs when reality made a mockery of them. But instead neoclassical economics completely rebuilt its belief system after the Great Depression, and here we are again, once more experiencing the disconnect between neoclassical beliefs and economic reality.
For the record, here’s my “GDP plus change in debt” table for the 1930s, to give us some idea of what the next decade or so might hold if, once again, we repeat the mistakes of our predecessors. VariableYear
1929
1930
1931
1932
1933
1934
1935
GDP
103,600
91,200
76,500
58,700
56,400
66,000
73,300
Change in Nominal GDP
6.0%
-12.0%
-16.1%
-23.3%
-3.9%
17.0%
11.1%
Government Debt
30,100
31,200
34,500
37,900
40,600
46,300
50,500
Change in Government Debt
-100
1,100
3,300
3,400
2,700
5,700
4,200
GDP + Change in Total Debt
109,200
91,600
67,100
50,800
49,900
69,100
76,700
Change in Total Aggregate Demand
0.0%
-16.1%
-26.7%
-24.3%
-1.8%
38.5%
11.0%
Bernanke, B. S. (2000). Essays on the Great Depression. Princeton, Princeton University Press.
Fisher, I. (1933). “The Debt-Deflation Theory of Great Depressions.” Econometrica
1(4): 337-357.
GVI Forex Jay 14:48 GMT August 31, 2010 Fade Trade:
Reply I posted this on GVI Forex and is an example of how to play news for what I call a “fade” trade.
GVI Forex Jay 14:39 GMT August 31, 2010
risk: Reply
Fade trade on bump in consumer confidence working out well.
GVI Forex Jay 13:58 GMT August 31, 2010
risk: Reply
Consumer confidence should be a good # to fade if it comes in above expectations as we know the mood is grim but this market will probably look for any glimmer of hope.
Forex Online_At present, the Sovereign Wealth Fund has become the important platform and the long-term strategic investors of the governments managing the foreign exchange (forex) capitals.
According to the sovereign wealth fund institute in the United States statistics, by the end of March in 2010, the capital scale of the sovereign wealth fund management worldwide has reached up to 3.839 trillion U.S dollars, taking up 47 percent of the global foreign exchange (forex) reserves stock year-on-year.
In addition, as for the foreign exchange (forex) reserves authority, the sovereign wealth fund has wide investment fields, undertaking the important responsibility of diversified management of the foreign exchange (forex) capital.
----Forex news from Forex Online
By Sarah
Beijing S 09:24 GMT August 27, 2010 Forex MT4_Value of Special Zone Platform:
Reply Forex MT4_The Hong Kong dollarbecame strong and drove the over estimated to the RMB. “Made in China”almost could not sell to cause the Hong Kong dollar became the main cash in the circulation.
For this purpose, Shenzhen was the first city to set up a foreign exchange (forex) swap center in the whole nation in 1985 to change the situation of lower RMB exchange rate and overstated value, which was good for drawing into the foreign capitals and expanding the exports to restrict the black market trading of the foreign exchange (forex).
In 1988, the Shenzhen research group formed by the State Commission for Restructuring the Economic System and other departments said that the Shenzhen exchange rate in the swap market was close to the real exchange rate, basically it could fluctuate in accordance with the alterations of the foreign exchange (forex) supply and demand and the price in the international market.
Trading Forex: As the Yen/USD hit the new record high within 15 years and the Yen/RMB enters the era of “eight”, the Japan government cannot “sit and stay still” any more.
On the 25th August, the Minister of Finance of Japan Yoshihiko Noda emphasized that the Japanese government has been aware of the situation of Yen/USD emerging unilateral appreciation, and they will take appropriate responded actions as occasion requires, including intervention to the foreign exchange (forex) market.
On 25th August, People’s Bank of China authorized the China Foreign Exchange (forex) Trade System to release that 100 Yen against RMB 8.0606 Yuan, which is the first time that the Yen/RMB has entered the era of “eight”.
The central bank of Japan—-Bank of Japan held the meeting to study to carry out additional eased policy.
The media in Japan indicated that the central bank will expand the foreign exchange (forex) market capital injection scale from the 20 trillion Yen to 30 trillion Yen with the “New-style and open operation”, and extend the time limit from 3 months to 6 months.
It is difficult for Japan to carry out the intervention to the foreign exchange (forex) market with the currency policy.
—-Forex news from Trading Forex
By Sarah
Beijing S 05:04 GMT August 25, 2010 Forex Trading_ Japan Economy Faced with “Death Crosses”:
Reply Forex Trading_ Owing to the Japan government has uncertain attitude to the intervention to the foreign exchange (forex) market. The stock market in Tokyo continued to be weak on 24th.
The Japan economy 225 index declined and broke the psychological barrier of 9000 points, and hit the new record low within 15 months by the 8938.5 points; finally it decreased 1.34 percent to 8995 points.
After the session, the chairman of the Tokyo Stock Exchange Dun Saito urgently called to that the Japan government must take actions to lighten the foreign exchange (forex) market’s worry to the continuously increased Japanese Yen.
In the Asian foreign exchange (forex) market on 24th, the Japanese Yen against other main currencies continued to be strong, the Euro against Yen exchange rate once touched 106.15 Yen; hit the new record low since December of 2001.
In the afternoon of 24th, the finance minister of Japan Yoshihiko Noda said that the Japanese Yen trend was evidently reflected unilateral appreciated trend in recent days; also the excessive and unordered foreign exchange (forex) fluctuation will bring negative impacts to Japan economy.
—-Forex new from Forex Trading
Edited By Sarah
Tonbridge AL 00:49 GMT August 25, 2010 EU Yields:
Reply reposted from the FF Belgrade TD 00:41 GMT August 25, 2010
10y yields: Reply
brisbane rr 00:14 GMT August 25, 2010
Have you tried the link http://sdw.ecb.europa.eu/ ... I'm not sure if there is anything you need, but is a good starting point ... GLGT
brisbane rr 00:14 GMT August 25, 2010
10y yields: Reply
Can anyone advise me of a page reference where I can look up 10y government bond yields for Spain Greece Ireland Italy Portugal and France.
Any assistance will be much appreciated.
Especially in the current unpredictable international economic and political environment, accumulating the gold reserves has many advantages in various aspects.
First of all, being different from the reserve currency issuing country which the foreign exchange (forex) leaves with and invest to, the gold reserves generally leave with the native country.
As a result, the gold reserves usually belong to national sovereign range and free from intervention of the supranational power, which is the big strength of increasing the gold reserves compared to accumulating the foreign exchange (forex) reserves.
Secondly, the gold itself is the substance of value, what is different from with the foreign exchange (forex) reserves, gold is the most reliable means to keep the value.
Finally, when the international political, economic and financial trend emerges mutation, gold’s nature of eternal wealth will have performed vividly and incisively.
It has to say that the gold plays a very important role in the national foreign exchange (forex) reserves.
"There’s something about this so-called global economy that reminds me of the sanitary worker who falls in a cess pool. To his great relief he discovers a bump on the bottom where, if he stands on his tip-toes and stretches his neck, he can just keep his mouth above the surface of the muck. To his great dismay he also discovers that taking a step in any direction only makes his predicament worse. He refuses all offers of help, muttering through clenched lip: “Don’t make a wave… Don’t make a wave…"
IT’S one of the toughest lessons an investor has to learn: while the value of assets can plummet posthaste, it takes forever to shrink the debt that was used to buy them.
Last week, this harsh truth was made clear yet again, in a report on consumers’ financial well-being by the Federal Reserve Bank of New York. The first of a Fed series to be published quarterly on household debt and credit, the 38-page report shows just how tapped out the consumer remains three years after the borrowing bubble burst.
To be sure, the data indicates that consumers are doing what they can to kick their debt habits. But the process is slow.
For example, total consumer debt stood at $11.7 trillion on June 30, down just 6.5 percent from its peak in the third quarter of 2008. The number of open credit card accounts was down considerably — 23.2 percent — from the highs reached during the second quarter of 2008, while mortgage obligations have fallen 6.4 percent from the peak that was seen almost two years ago.
Many consumers, though, are still very much in a vise. Halfway through this year, 11.4 percent of outstanding consumer debt was delinquent, up slightly from 11.2 percent a year earlier. An astonishing $1.3 trillion of consumer debt is delinquent, with $986 billion seriously so — 90 days late and counting. While delinquent balances are down by about 3 percent from the same period last year, serious delinquencies are up a bit more — 3.1 percent.
Here are some other troubling statistics from the Fed: a half-million people had a foreclosure added to their credit reports between March 31 and June 30, an increase of 8.7 percent over the first quarter of the year. And the numbers of consumers with new bankruptcies appearing on their credit reports rose 34 percent during the quarter, to 621,000. That increase is significantly bigger than it has been in the last few years, according to the Fed.
Per capita debt balances are staggering, as well — and for many consumers, the assets underpinning these obligations have collapsed. Reflecting the heavy burden that mortgages represent for most consumers, these debts are highest in states where the real estate mania went craziest. In California, for example, the average per capita debt balance among consumers with a credit report is $78,000, the Fed said; in Nevada, it is $73,000. The nationwide average is $49,000.
ADDING to the weight of these debts is the fact that consumers’ income statements aren’t exactly flush right now, thanks to high unemployment and rock-bottom interest rates. The misery of a balance sheet deleveraging is being exacerbated by a dearth of income opportunities.
Of course, this is what happens after a spectacular asset bubble bursts. Nevertheless, for consumers who are cutting debt and trying to save, it is dispiriting indeed that they generate so little on their money. Those living on fixed incomes are also in a bind.
It is not lost on these consumers that their minuscule returns are a direct result of the Federal Reserve’s attempt to shore up troubled banks’ financial standing. Sharply cutting interest rates vastly increases banks’ profits by widening the spread between what they pay to depositors and what they receive from borrowers. As such, the Fed’s zero-interest-rate policy is yet another government bailout for the very industry that drove the economy to the brink.
Todd E. Petzel, chief investment officer at Offit Capital Advisors, a private wealth management concern, characterizes the Fed’s interest rate policy as an invisible tax that costs savers and investors roughly $350 billion a year. This tax is stifling consumption, Mr. Petzel argues, and is pushing investors to reach for yields in riskier securities that they wouldn’t otherwise go near.
In short, the Fed’s interest rate policy may be causing more economic problems than it’s solving.
Here’s how Mr. Petzel calculated the amount that savers are losing: Some $14 trillion in debt issued by the Treasury, federal agencies and municipalities is held by investors here and overseas. Rates are currently near zero on short-term Treasuries, compared with an average of 3 percent over time. Therefore, Mr. Petzel says, it is reasonable to estimate that rates are too low by 2.5 percentage points. On $14 trillion, that’s $350 billion a year in lost income.
Yes, we’re talking real money. It’s more than 2 percent of gross domestic product and almost 3 percent of disposable personal income, Mr. Petzel noted.
“If we thought this zero-interest-rate policy was lowering people’s credit card bills it would be one thing but it doesn’t,” he said. Neither does it seem to be resulting in increased lending by the banks. “It’s a policy matter that people are not focusing on,” Mr. Petzel added.
One reason it’s not a priority is that savers and people living on fixed incomes have no voice in Washington. The banks, meanwhile, waltz around town with megaphones.
Savers aren’t the only losers in this situation; underfunded pensions and crippled endowments are as well.
Of course, the federal government is a huge beneficiary of low rates; if they were higher, our already ballooning deficits would be heftier still. Nevertheless, raising interest rates a bit would be beneficial on several counts, Mr. Petzel maintains. It could help increase consumption and would reduce the appeal of higher-yielding and dicier investments.
THE Fed may be fearful, Mr. Petzel surmised, that higher interest rates could push some teetering banks off the cliff. “But saving a few more zombie enterprises with strong Washington voices at the expense of millions of savers’ consumption may be missing the forest for the trees,” he said.
As the midterm elections approach, expect to hear arguments that the recent bailouts have not been that onerous, when all is said and done. But such contentions are unlikely to include the costs of near-zero interest rates, a sizable line item on any accurate reckoning of the bailout bacchanal.
A version of this article appeared in print on August 22, 2010, on page BU1 of the New York edition
Beijing S 08:31 GMT August 23, 2010 Trading Forex: Japan is paying closely Attentions to Forex Market:
Reply Trading Forex: The financial minister of Japan Yoshihiko Noda said on 20th August that he was closely paying attentions to the trends in the foreign exchange (forex) market.
Even though the Japanese Yen against USD approached the high point of 15 on 19th August, he still reasserted his current opinion that the Japan government is not consider about taking actions immediately to keep down the downtrend of Japanese Yen.
Yoshihiko Noda said on a regular new release that he is attaching importance to the developments in the foreign exchange (forex) market, and will give utmost attentions to the Japanese Yen trend.
However, he also pointed out that he would not give comments on the exchange rate level and the interventions to the foreign exchange (forex) market.
He stated that the economic recovery process in Japan is continued, but its pace has slowed down.
He also said that he does not know yet whether the Prime Minister Naoto Kan and the director of the Bank of Japan Masaaki Shirakawa will have a meeting on the foreign exchange (forex) market next week.
He complemented that he can do the report to the Naoto Kan on the possible stimuli measures, including the exchange rate problem and foreign exchange (forex) market, and would like to cooperate with the Bank of Japan.
Edited By Sarah
Beijing S 08:48 GMT August 20, 2010 Forex Forum_ Essence of Forex Management is Hedge Risk:
Reply Forex Forum_ The retailers who are engaged in conducting the financial production selling are not the spot focus like the foreign exchange (forex) analysts, not be smooth and slick like the forex speculators, but those group of people constitute of the most basic forces of the financial trading.
The author expected that by studying the logic of the science within those people’s basic concepts and applying it to the foreign exchange (forex) reserves management that is concerned by the public.
The trading purposes of the retailers is to earn the handing charge but not afford the products risks. Therefore, the retailers do not look for the price difference of the products, but only seek for the matching conditions, such as the types, numbers, deadline, price and so on.
The author once took part in one forum activity that was held by the foreign exchange (forex) authority, whose topic was all kinds of banks’foreign exchange (forex) traders exchange experience respectively and how to hedge the risks with the process of doing foreign exchange (forex) trading.
The conclusion the authour reached is that the bank cannot absorb the risks of the foreign exchange (forex) fluctuation because of the immediate interest and profit, how can one country manage the foreign exchange (forex) reserves?
The purpose of the foreign exchange (forex) management is not to afford the risks but to hedge risks.
The essence of hedge risks is not to make foreign exchange (forex) depreciation with one foreign exchange (forex) appreciation, because people cannot indicate which kind of foreign exchange (forex) appreciated or depreciated in the future.
It is a long way to go for China foreign exchange (forex) reserves management being mature.
Beijing S 07:29 GMT August 19, 2010 Trading Forex–Citic Pacific walks out of Huge Losses of Forex Speculation:
Reply Trading Forex–The Citic Pacific published its achievements on 18th August; the net profit belongs to the listed company in the first half of year is 4.884 billion Hong Kong dollars, going up for nearly doubled amount compared to 2.468 billion Hong Kong dollars last year.
During the period of more than one year of his assuming office, the chairman of the Citic Pacific Chang Zhenming leads the company to walk out of the dilemma of the foreign exchange (forex) speculation event and gains the better profit.
In the financial crisis of the year 2008, the Citic Pacific suffered from the great losses of 14.6 billion Hong Kong dollars because of foreign exchange (forex) speculation.
Due to the company suffered from the huge losses because of foreign exchange (forex) speculation in 2008, Chang Zheming who was entrusted with a mission at a critical and difficult moment on April of year 2009 is always the spot focus.
He said that in his career, holding the post of the Citic Pacific chairman is the most challenge work, and needs the highest requirements.
In addition, the report showed that the Citic Pacific is not recorded the lever-type foreign exchange (forex) contract yield.
The company explained that except for three lever-type foreign exchange (forex) contract, other lever-type foreign exchange (forex) contracts has transferred to Citic.
Forex Forum_ China reduced the US Treasury bonds while accumulated the Japan government bonds, within the one reduction and another accumulation, the foreign exchange (forex) reserves operation released the signal of diversification.
The foreign exchange (forex) reserves investment strategy that do not put all the eggs in the same basket and “east light while the west does not shine”is more obvious.
Currency value stability is the top priority consideration that China foreign exchange (forex) reserves carry out government bonds investment.
The shifting of hedge capital between the USD capital and risk capital brought about the USD depreciation, since June this year, the USD index began to decline.
However, the Euro began to rebound after the Europe debt crisis gradually, and the Japanese Yen become one of the strongest international currencies because the long-term current account trading surplus and the foreign net capital.
In addition, the action that the foreign exchange (forex) reserves reduced the US Treasury bonds while accumulated the Japan government bonds and Europe government bonds, no doubt, accorded with the demand of adjusting the foreign exchange (forex) reserves structure gradually.
Safety, liquidity and profitability are the three important principles of the China foreign exchange (forex) reserves investment.
View from the historical experience, when the US Treasury bonds reached the high point, China foreign exchange (forex) reserves would enlarge the purchase volume, and on the contrary, it would reduce.
Edited By Sarah
Beijing S 05:25 GMT August 18, 2010 Trading Forex- The Forward Exchange Transaction:
Reply Trading Forex- The forward exchange transaction, what is different from the spot exchange transaction is that after the market trading entity finishes making the bargain, the trading parties conduct the trading in the specified date in the future, generally speaking，after the three business days after the closing date, according to the forward contract.
The forward exchange transaction is the indispensible constituent part of the effective foreign exchange (forex) market.
In the early stage of the 70s, the exchange rate system within the international range changed its direction to the floated-exchange rate-orientated from the fixed-exchange rate-orientated. The fluctuation of the exchange rate is intensified and the financial market grew vigorously, which pushed forward the development of the forward foreign exchange (forex) market.
The forward exchange transaction is carried out with the forward contract. However, the forward forex transaction can be used in various purposes, such as hedging, forex speculations and the commercial and financial forex investment activities.
Edited By Sarah
JAKARTA17:32 GMT August 17, 2010 Forex Trading– Mobile Bank Service “Competition”:
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JAKARTA17:31 GMT August 17, 2010 Forex Trading_ The Central Parity of RMB hit Record Low Again:
Reply im start use US$20 and in 3 months im make US$2000 a months now, if your like trading, this more easy then trade forex directly, because risk more can controlled, join here .........
http://eagle1.betonmarkets.com/GB/PORTAL/CR29378
Beijing S 05:21 GMT August 17, 2010 Forex Trading_ The Central Parity of RMB hit Record Low Again:
Reply Forex Trading_ China Foreign Exchange (forex) Trade System published that the central parity of RMB against USD in interbank foreign exchange (forex) market on Monday spot hit the new record low of more than one and a half month.
The USD index had the best performance since the end of year 2008, and the central parity of RMB in forex market opened low yesterday, however, the Chinese banks’ purchasing the foreign exchange (forex) session increased in domestic market to push forward the weak trend of RMB spot exchange and Non-Deliverable Forward.
People’s Bank of China authorized the China Foreign Exchange (forex) Trade System to publish that the central parity of USD against RMB exchange rate in interbank foreign exchange (forex) market was 6.8064 Yuan yesterday.
The forex trader said that the central parity in forex market changes reflected the strong trend of the USD in recent days.
Forex Trading– Mobile Banking Service is another financial business service means to facilitate the users following the internet banking and telephone banking, known as the “personal electronic wallet”.
With increasing growth of the surfing in the internet with cell phone crowd, mobile banking service is favored by more users because it can handle with various financial businesses anytime and anywhere, certainly, including the foreign exchange (forex) trading business.
In the aspect of the mobile banking financing service, the China Construction Bank is the most comprehensive one. The mobile banking financing service of China Construction Bank can do funds investment, stock investment, foreign exchange (forex) business, Q coins recharging, buy the personal insurance and order tickets.
The mobile banking service of Bank of Communications, at present, opens the businesses of foreign exchange (forex) and funds business.
The mobile banking service of China Merchants Bank can carry out the foreign exchange (forex) and security trading businesses.
At present, the Bank of China only supports the foreign exchange (forex) trading business.
Edited By Sarah
Beijing S 06:15 GMT August 13, 2010 Forex Trading_ Intervention to Foreign Exchange:
Reply Forex Trading_ At the meantime, the Bank of Japan holds the general dialogue with some of the banks on the foreign exchange (forex) market issues.
The Bank of Japan acted more careful on the questions they asked in the exchange rate investigation.
The rest of foreign exchange (forex) traders of the larger banks in Japan said that they heard about that the Bank of Japan asked the question like if the Bank of Japan buys 10 million U.S dollars of USD against Yen currency pairs, how much wills the USD against Yen exchange rate change.
The senior foreign exchange (forex) trader of the Bank of Tokyo Mitsubishi UFJ said that those news trigger that the forex investors’indication to the Bank of Japan may enter into the foreign exchange (forex) market to conduct intervention action, and then to urge the foreign exchange (forex) participants sell the Yen.
However, many of the forex market participants think that it is impossible for the Bank of Japan to conduct intervention to the foreign exchange (forex) market, because so long as the Yen exchange rate fluctuates orderly. Moreover, without the assistance of United States and other countries, it is difficult for Japan to change the exchange rate trend.
Edited By Sarah
Beijing S 09:26 GMT August 12, 2010 Forex Trading–Why the Forex Market do Trading for 24 hours?:
Reply Forex Trading–The international foreign exchange (forex) market, which is the tremendous trading system constituted by the foreign exchange (forex) markets in the international center of countries all over the world, is different from the stock market in people’s mind.
The foreign exchange (forex) market refers to the trading website or trading place where the foreign exchange (forex) supply and demand parities and the foreign exchange (forex) intermediary organ do the currency exchange and foreign exchange (forex) business.
The shape of the foreign exchange (forex) market is just like the physical market, such as the stock exchange and the invisible market that has no specific trading place formed with the modern communications tools, such as the telephone, telex, trading website and the internet.
As the development of the modern communication facility and technology, the invisible market has become the dominant form of the foreign exchange (forex) market.
There are more than 30 foreign exchange (forex) markets in the whole world.
The development of the modern communication facility and technology makes them be related to each other, therefore, in addition to Saturday and Sunday and other major festivals holidays, the foreign exchange (forex) market is in the state of trading in any time from Monday to Friday, which makes the international foreign exchange (forex) become the continuous operation for 24 hours both by day and by night.
Edited By Sarah
Beijing S 07:16 GMT August 11, 2010 Forex Currency Trading_ Central Parity of RMB against USD fell back 60 Basis Points:
Reply Forex Currency Trading_ The latest data released by the China Foreign Exchange (forex) Trading Center showed that the central parity of RMB against USD exchange rate in interbank foreign exchange (forex) was 6.7745, fell back 60 basis points compared to the central parity in interbank foreign exchange (forex) market last trading day.
People’s Bank of China authorized the China Foreign Exchange (forex) Trading Center to publish that the central parity of USD and other currencies against RMB exchange rate in interbank foreign exchange (forex) market on 10th August, 2010 was one dollar against 6.7745 Yuan, one euro against 8.9406 Yuan, 100 Japanese Yen against 7.8732 Yuan, one HK against 0.87276 Yuan and one pound against 10.7457 Yuan.
On the last trading day, the central parity of RMB against USD in interbank foreign exchange (forex) market was 6.7685.
On Monday, the USD inflected slightly rebounded trend in the international foreign exchange (forex) market and the non-US currencies fell back.
At present, the focus that the foreign exchange (forex) market concentrates on is the short-term interest rate resolution and the policy statement which will be released by the Federal Reserve System.
Forex Currency Trading_ Yesterday, the central parity of RMB against USD in interbank foreign exchange (forex) market was one dollar against 6.7685 Yuan, increased 45 basis points compared to last trading day, hit the record high since the RMB exchange rate reform in July 2005.
This is the first time that the central parity of RMB against USD in interbank foreign exchange (forex) market has broken through the check point of 6.77.
Compared to that the central bank announced to push the RMB exchange rate forming system reform further, RMB against USD exchange rate in interbank forex market accumulatively appreciated 0.86 percent.
Influenced by the non-U.S employment data being poorer than the expected, the main non-US currency begins to be strong and the USD index decreased significantly. However, China economic performance acted well, the RMB exchange rate increased.
Yesterday, the central parity of RMB against USD in interbank foreign exchange (forex) market appreciated 45 basis points, and the RMB against HK appreciated 5.3 basis points, RMB against Yen, Euro and Pound depreciated 372.638 and 466 basis points respectively.
Within over one month since the RMB exchange rate reform restarting, the flexibility of the RMB against USD in interbank foreign exchange (forex) market strengthened evidently.
Edited By Sarah
Beijing S 05:27 GMT August 9, 2010 Forex Currency Trading: RMB Two-way Fluctuations Flexibility Increased:
Reply Forex Currency Trading: Review the performance of the internationals forex market last week, the RMB two-way fluctuation gradually reduced the RMB unilateral appreciated expectation. A series of weak economic data in United States made the U.S dollars become the “outcast” of the financial market; the index of USD is almost equal to the check post of 80.
It is worth noting that on 4th August, the central parity of RMB against USD in interbank foreign exchange (forex) market was 6.7715; hit the record high since the RMB exchange rate reform again. However, compared to the uptrend of Euro, Japanese Yen and other currencies against USD, the growth of RMB against USD still was smaller than the other currencies.
The foreign exchange (forex) trader in China Merchants Bank thinks that the slight uptrend of RMB is accorded with features of pegging to a basket of currencies and is good for calming down the negative effects of excessive RMB appreciation.
The forex trader indicates that RMB against forward exchange rate in interbank foreign exchange (forex) market will fluctuate within interval of 6.77 to 6.80 for a while.
Forex Trading: The central bank pointed out that as for the influence of moving forward RMB exchange rate reform to China export and import and the employment, the advantages far outweigh the disadvantages.
As for the work at the next stage, the central bank said that they should perfect the RMB exchange rate forming system, and carry out the development of the foreign exchange (forex) market to enrich the exchange rate risk management tools.
In the meantime, they will continue to carry out the benchmark interest rate system development in the currency market, enhance the scientific pricing ability, and promote the adjustment function of the price lever.
On 22nd June, the central bank released the “Circular of Expanding RMB Settlement Experimental Units of Cross-border Trading”, jointed with other six ministries and commissions, to expand the RMB settlement experimental units scope of cross-border trading and increase domestic experiment units regions.
Being influenced by this, the trading volume of RMB settlement of cross-border trading increased sharply in the second quarter.
The central bank also said that on the next stage, they will carry out the RMB settlement experimental units of cross-border trading with steady steps; promote the facilitation of forex trading and forex investment to support the enterprises to “go out”.
They also will continue to deepen foreign exchange (forex) management system reform, promote the balanced flowing of the capitals, standard and perfect the management to cross-border capitals and enhance the monitoring and managing to the illegal or abnormal capitals.
Forex Currency Trading: One foreign exchange (forex) trader of Japanese bank revealed that it is said that one Mrs.Watanabe does the foreign exchange (forex) margin trading and earns million of yens with tens of thousands yens, even there are professional institutions track the forex investment thinking of the targeted Mrs.Watanabes to be the frame of reference of selling and buying Japanese Yen.
However, since August, the influence of Mrs.Watanabes is marked by a full stop. On 1st August, the Japan government carried out the revised cabinet order to formulate the upper limit of the foreign exchange (forex) margin trading leverage ratio, which declined the foreign exchange (forex) margin trading leverage ratio to 50 times and further decrease to 25 times in the August next year.
The Japan government said that the measure aimed at eliminating the excessive forex speculative action of the traders who is lack of experience.
Many of the foreign exchange (forex) traders analyzed that to correspond to the new regulations of foreign exchange (forex) margin trading in Japan, most of the Mrs.Watanabes settled the forex investment position in advance that violated the new leverage limit, made huge amount of capitals backflow, which leaded to the USD against Japanese Yen hit the record low continuously. This is the result that the Mrs.Watanabes does not be willing to see.
The majority of Mrs.Watanabes conducts the highly speculative foreign exchange (forex) margin trading. They will bid the low interest Japanese Yen and invest the high-yield bonds in oversea market and the foreign exchange (forex) deposits to arbitrage the spread earning.
With the significant reduction of leverage, the only way for Mrs.Watanabes to reduce the position is to buy the Yen and sell other currencies capitals, and then increased the needs for Yen, leading to the Yen appreciation.
Forex Trading_ How high do China foreign exchange (forex) reserves rise? China structured the new type of the foreign exchange (forex) reserves management system.
The State Administration of Foreign Exchange (forex) published new regulations that they will make a difference between the foreign exchange (forex), exchange earnings and settlement of exchange of the corporations’ trading, giving sufficient convenience to the lawful operation corporation.
The “Circular of Improving the Management to Foreign Exchange (forex) Earnings and Settlement of Exchange” that released by the State Administration of Foreign Exchange (forex) ruled that the lawful operated corporations can handle exchange earnings and settlement of exchange directly.
As for those corporations that the exchange earnings of trading and the total needed differ over 10 percent, or have the record of violating the foreign exchange (forex) management regulations are included in the “concerned corporations”which must submit the evidence before they conduct the related foreign exchange (forex) business.
The circular strengthens the return remittance management to the exchange earnings of trading, especially the case that returned after remitted, which required that the exchange earnings department explain the situation to the State Administration of Foreign Exchange (forex).
The circular also requested that the bank should be strictly in accordance with the related provisions to enhance the authenticity examination to the foreign exchange (forex) capital inflow.
The SAFE will strengthen the monitoring to the banks and “concerned corporations”, promptly transfer the corporations that violate the foreign exchange (forex) management regulation to the related departments to investigate and punish.
Forex Trading: The action of the State Administration of Foreign Exchange (forex) called 28 banks together to have a meeting and circulate a notice of foreign exchange (forex) warning at the end of the July, and the 190 alleged violation cases that amount reached up to 73.5 billion U.S dollars in the foreign exchange (forex) inspection movement has stirred up great waves within a lot of bank industries.
Within the three loopholes that the State Administration of Foreign Exchange (forex) pointed out in the meeting, the “hyper normal growth of the foreign exchange (forex) loans in the first half of year” gained more attentions from the market, because it is associated closely with the hot money inflow.
However, as for the entity trading, the growth of the foreign exchange (forex) loans is different in the different regions.
The foreign exchange (forex) loans in Shen Zhen have extreme contrast with the whole nation, emerging the pattern in the first half of year that the foreign exchange (forex) loans had negative growth while the foreign exchange (forex) deposit increased. Part of the reasons lies in that under the foreign trade surplus declined of the whole nation, the foreign trade surplus of Shen Zhen expanded.
The reverse pattern of the Shen Zhen foreign exchange (forex) deposit and foreign exchange (forex) loans may be the indication of nationwide recovery of foreign trade after the global economy recovery.
On one hand, along with the international trade restorative recovery, the nationwide trade surplus will be enlarged. The leading role of the Shen Zhen foreign exchange (forex) loans pattern will affect the whole nation.
On the other hand, the large reverse changes of the Shen Zhen foreign exchange (forex) loans in the first half of year 2009 and 2010 seemingly explained the factors that drove the hyper normal growth of the foreign exchange (forex) loans in 2009 is getting variation by the means of RMB pledge.
Forex Trading_ Since the People’s Bank of China announced to move forward the RMB exchange rate system reform further based on supply and demand of the market, the flexibility of the RMB exchange rate strengthened. Last week, the exchange rate floating range of RMB against the main currencies narrowed, not emerging significant fluctuation.
Last week, the central parity of RMB against USD exchange rate in the foreign exchange (forex) market had ups and downs, but stably floated at 6.77 intervals.
The recent data showed that the recovery of United States economy is still weak, while the USD is bearing pressure, promoting the small appreciation of RMB.
However, the Europe economy that is better than the expected promoted the Euro and pound to be strong. Affected by this, five trading days last week, the central parity of RMB against Euro exchange rate in the forex market and the central parity of RMB against pound exchange rate in the forex market were all showing a slightly down trend gradually.
In the foreign exchange (forex) market last week, the exchange rate of USD continuously bore pressures; the index had slipped down to 81.60 from the 82.70. On one hand, the Europe data improved the confidence of the forex market. And on the other hand, the United States data casted a shadow on the economic prospects of the second half of year in the forex market.
The foreign exchange (forex) analyst of the Bank of Communications Beijing branch, Zhang Deqian said that being specific to all kinds of trading currency, in Euro, Euro against USD increased continuously last week, which exchange rate rose to 1.30 from 1.2910.
In Japanese Yen, USD against Japanese Yen was weak after session correction. Japan’s Finance Minister said that they would pay close attention to every trend in the foreign exchange (forex) market.
Forex Trading__The foreign exchange (forex) loans are regarded as the business that can succeed in the market without really trying by banks and corporations. May be just because of this, nearly one year, the momentum of foreign exchange (forex) loans growth was sharp.
At the same time, the growth space of the foreign exchange (forex) deposit is limited, the loan to deposit ratio of the foreign exchange (forex) loans increased further. By the end of June, the loan to deposit ration of the foreign exchange (forex) loans reached up to 193.61 percent while the data of the foreign exchange (forex) loans was 122.4 percent last year.
Looking up the foreign exchange (forex) credit balance sheet of the financial institutes released by the People’s Bank of China, people can see that the balance outstanding of the foreign exchange (forex) loans went up with steady steps since the June of 2009, and reached up to 30 billion U.S dollars in July in 2009.
From now on, with the increasingly intensify of the RMB appreciation expectation, the balance outstanding of the foreign exchange (forex) loans accelerated sharply. With only eight months, the balance outstanding of the foreign exchange (forex) loans broke through the 40 billion U.S dollars mark in March this year.
Forex Trading__The State Administration of Foreign Exchange (forex) warned the banks that there are violations in their foreign exchange (forex) business operation.
To control the inflow of the hot money is still the top priority of the supervision authority work. The reporter learned in 29th that the State Administration of Foreign Exchange (forex) held the briefings on the foreign exchange (forex) inspection of the banks in Beijing a few days ago to circulate a notice that part of the banks still existed illegal behaviors or violations in the process of operating the foreign exchange (forex) business.
The meeting indicated that in the past two years, the State Administration of Foreign Exchange (forex) organized and carried out many special inspections one after another to the foreign exchange (forex) business of banks on a national scale.
Even though the overall status of compliance operation of the all kinds of authorized banks of the foreign exchange (forex) improved further, there are still illegal behaviors existing in the portion of the banks’process of foreign exchange (forex) operation.
Forex Trading_ On Wednesday, the Class Share A waked up, closing and increased 58 points; the growth reaches up to 2.26 percent. The session surpassed 2600 points and up to 2633. The stocks grew, leaded by the weight strands. The appreciation trend emerged in front of us again.
Let us see the foreign exchange (forex) price on Wednesday, the central parity of USD and other trading currency against RMB exchange rate in foreign exchange (forex) market between banks was one dollar against 6.7785 Yuan on 28th July, 2010.
All the forex investor who concern about the appreciation trend, they should pay special attention to this signal.
And the vice president of People’s Bank of China, Hu Xiaolian published articles again to discuss exchange rate system, which is the third time this week. He said that a more flexible exchange rate system is conductive to control the inflation and the capital bubbles.
To adjust imbalance of forex trading and out-of-balance of the international balance with some appropriate means of exchange rate and price, which contributes to ease the pressure that inflow of the foreign exchange (forex) and the too fast foreign exchange (forex) reserves accumulation.
Forex Trading_From the 28th November, 2007 to 28th July, 2010, the period of 32 months, the central parity of RMB against USD in foreign exchange (forex) market up to 6.7785 from 7.3899, the growth is about 8.27 percent.
on 28th July, one lay-in revealed that the China Huijin Corporation injected 19 billion U.S dollars to the Agricultural Bank of China, a portion of it carried out settlement of exchange at that moment; the rest of it signed the foreign exchange (forex) options trading agreement reference to the three-line models to conduct the risk hedge.
However, the above lay-ins not disclosed the specific price and option cost of the foreign exchange option. And the consignee analyst of Agricultural Bank of China also said that the Agricultural Bank of China did not adopt the means of “foreign exchange (forex) options trading agreement”.
In June 2010, People’s Bank of China restarted the exchange rate reform process, RMB against USD appreciated by 0.8 percent within one month. Under the new expectation of RMB appreciation, the foreign exchange (forex) capitals of China Everbright Bank and Agricultural Bank of China will have to face with the depreciation worry.
In the social upsurging listing of People’s Bank of China, China Construction Bank and Industrial Bank of China in the year from 2005 to 2007, the exchange rate risk of the foreign exchange (forex) capital funds of three state-owned commercial banks became the hot topic.
Under the context that the overseas strategic investors and IPO investors worried about RMB appreciation, the foreign exchange (forex) capital funds depreciation will influence the net asset and price of per share.
From the perspectives of the commercial banks, there are also needs to hedge the exchange rate risk of foreign exchange (forex) capital funds.
What is the most important to do with the “foreign exchange (forex) options trading agreement”is to make sure three factors, trading object and agreement amount, options performance price and options fee.
Forex Online_Due to the oversea business of Zhong Xing Telecommunication Equipment Company Limited developed rapidly, the company needs to respond actively to exchange rate changes of the foreign currencies to minimize the remittance losses. The company adopts mainly two means to avoid the remittance losses from the perspective of generally conducting foreign currency business.
First of all, under the assumption of exchange rate changes trend, the company assumed that to regard the foreign currencies against RMB as the expectation, what need to do is to minimize the foreign exchange (forex) risk exposure, that is, the company should offset the payable accounts (including the foreign currency loans) measured in foreign currency with the receivable accounts as possible as the company can.
Secondly, the company will form the foreign currency hedge between projects, at the same time; it will maintain value of the foreign exchange (forex) risk exposure by carrying out forex derivatives investments.
To maintain value of the foreign exchange (forex), the company carried out actively foreign exchange (forex) derivatives investment.
The proposal will invest to no more than 700 million U.S dollars and 200 million Euros foreign exchange (forex) derivatives.
The company thinks that this kind of amount basic covers the possible foreign exchange (forex) risk exposure within the foreign currency business in 2010.
Forex MT4-----Euro against USD in session increased significantly on Monday of New York foreign exchange (forex) market, breaking through 1.3000 levels in session, hit record high of one week. Even though the forex market holds the skeptical attitude to the optimistic stress test result of Europe bank industry, the forex investors have different understanding to the stress test result.
However, the economic data of Europe recently released is strong, which exceeded the forex market's expectations. Part of it proved that the schedule of economic recovery in Euro zone is better than the expected though under the context of the government reduced substantially deficit.
Some forex analysts pointed out that the stress test result of Europe bank industry published on last Friday did not show new disaster. After releasing the result, the Euro maintained its shock trend on Friday.
German Commercial Banks said that the Europe data is unexpectedly active recently; Euro will try again to stand firm on 1.3000 while the economic data of U.S will continue to be weak.
In this regard, the foreign exchange (forex) strategist of UBS, AmeliaBourdeau said that the forex investors in foreign exchange (forex) market cannot certain which information they should digest among the stress test result, resulting in the Euro showed shock trend.
The forex analyst of HSBC Holdings Plc in London-----Mark said the data released by the central bank showed that the average daily turnover of the global foreign exchange (forex) market has increased to over 4.1 trillion U.S dollars from the 3.2 trillion U.S dollars in 2007.
According to the report published by New York Federal Reserve that the average daily turnover in the foreign exchange (forex) market of US was 754 billion U.S dollars, increased by 12 percent compared with the October last year. Over the same period, the average daily turnover in the foreign exchange (forex) market of Britain was 1.75 trillion U.S dollars, increased by 15 percent year-on-year.
According to the report released by the foreign media yesterday that compared with the October last year, the turnover of foreign exchange (forex) grew substantially in April, which resulting from that the sovereign debt crisis in Euro zone caused the growth of forex turnovers.
New York Federal Reserve: U.S daily average turnover of foreign exchange hit second in April
The Foreign Exchange (forex) Committee subordinated the New York Federal Reserve said that U.S daily average turnover of foreign exchange (forex) in April was 754 billion U.S dollars, hit the second in the record. The daily average turnover of outright forwards and foreign exchange (forex) swaps all was at the record high in April.
Integrated media reported on 26th July that the Foreign Exchange Committee said that the daily average turnover in U.S foreign exchange
(forex) market increased 11.8 percent compared with October 2009, second only to the high record in October 2008.
The Foreign Exchange Committee said that in April 2010, the total daily average turnover, including the desk foreign exchange (forex) instruments, such as spot transaction, outright forwards, foreign exchange (forex) swaps and foreign exchange (forex) options was 7,540 million U.S dollars, 6,750 million U.S dollars higher than the last report in October 2009.
The Foreign Exchange Committee also said that after the reduction significant in April 2009, the daily average turnover began to recover its increasing trend. The outright forwards and foreign exchange (forex) swaps hit its record high, reached up to 1,040,million and 2,030 million U.S dollars respectively.
China should realize that with the recovery and growth of the economy, the foreign exchange (forex) flowing into quickly and the liquidity increased a lot.
After taking positive measures to do hedging operations, the liquidity still is abundant; there are existences potential risks that the expected inflation intensified and capitals price speculation.
Therefore, what is the important task for the macro-economic policy-makers at this stage is that China needs to handle the relationships correctly between maintaining stable and rapid economic development, economic structure adjustment and managing the expected inflation.
On the basis of maintaining a relatively fixed exchange rate, the continuous growth of international balance surplus and constant inflow of the foreign exchange (forex) directly caused that People’s Bank of China put the basic currencies into circulation passively in the form of Foreign Exchange (forex) Reserves.
Recently, under the unified arrangement of CPC and State Council, People’s Bank of China thoroughly implements the scientific outlook on development and continues to enforce and perfect the macroeconomic control ability.
Aiming at the external and internal economic financial trend and the flowing of the foreign exchange (forex), China should treat to strength the liquidity management of banking system as the main task of monetary policy controls, with the use of open market operation hedging instruments to hedge the funds outstanding for foreign exchange (forex)’s strong growth and recover the excess liquidity of the banking system.
View from the source structure of the base currency in recent years, funds outstanding for foreign exchange (forex) becomes the main channel to supply the base currency.
The foreign exchange (forex) loans growth declined significantly.
The central bank released its financial institute loan investment direction of the first half of 2010. The data showed that the real estate loans growth down substantially in the first half the year, the experts said that the tightening of the real estate was compatible with the tightening up of the whole economy growth.
According to the statistics of the central bank, the foreign exchange (forex) loans balance of all of the financial institutes grew 39.4 percent year-on-year by the end of June, whose growth decreased 20.2 and 16.6 percentage points respectively compared to the end of last month and last year. The foreign exchange (forex) loans newly added 32.3 billion U.S dollars in the first half of year.
According to the experts’ analysis, what are the reasons of the foreign exchange (forex) loans growth declined significantly are few demands and diving tightening up of financial institutes. In the foreign exchange (forex) loans, the corporations carried out foreign exchange (forex) loans mainly used for foreign trade and overseas investments.
Moreover, the using channel of the foreign exchange (forex) loans is not rich; the majority of the corporations prefer to hold RMB.
On the other hand, some experts think that the foreign exchange (forex) loans growth declined significantly in the first half of year is mainly caused by the banks’ driving tightening up and decreasing the foreign exchange (forex) loans.
China will begin a new round of RMB exchange rate reform, announced by People's Bank of China to the public on June 20, which is the second time that the central bank has carried out reform to the RMB exchange rate since July, 2005.
To coordinate this round of exchange rate reform, China government produced two related policies.
First one is to allow exporting the foreign exchange (forex) that the corporations maintained in oversea market, but not to do centralized settlement of the foreign exchange (forex) to the foreign exchange (forex) management institute. And the other one is to expand the range of RMB clearing in oversea trading.
Both of them slow down the speed of China foreign exchange (forex) reserves accumulation.
In view of the specific number of the domestic hot money unclear, it, with conservative estimation, may reach up to 8 thousands to 1 trillion U.S dollars.
The central bank, at the pace to change the RMB exchange rate, will adopt a gradual and controllable adjustment policy to prevent the flowing substantially of the international capitals and maintain the relative stability of the economy.
People's Bank of China announced to the public on 20th, June that China will begin a new round of RMB exchange rate reform.
Then how will the RMB exchange rate evolve in the future? This is decided by two factors, first is the cross-border flowing of the international capitals, and second is the macro-economic situation and currency policy trend in domestic market.
First of all, the width of RMB exchange rate adjustment must take the risks of cross-border flowing of the international capitals into consideration. At present, though nominally China government possesses 2.45 trillion U.S dollars foreign exchange ( forex) reserves, if deducted the possible losses of the 376 billion U.S dollars Freddie Mac and Fannie Mae bonds in United States and the foreign exchanges (forex) that the foreign banks holding.
The central bank itself is holding 900 billion U.S dollars Treasury bonds, meanwhile, the foreign exchange (forex) reserves that the government remained and is available for exchanging foreign currency freely are less than 1 trillion U.S dollars.
Secondly, the direction of adjustment to RMB exchange rate also is closely related to the domestic economic situation and currency policy at present.
If RMB gets significant appreciation at this moment, no doubt, it will make the foreign exchange (forex) reserves held by the central bank face with depletion danger.
Due to the foreign exchange (forex) speculators do not know how to judge the supervision qualifications of the foreign exchange (forex) brokers; they may not guarantee the security of their own funds, resulting in suffering from losses that should be avoidable.
There is some knowledge about the supervision qualifications of the foreign exchange (forex) brokers to ensure the safety of the funds that are used to do foreign exchange (forex) speculations.
Doing foreign exchange (forex) speculation, how to guarantee the safety of funds?
It is almost twenty year since the retail foreign exchange (forex) industry emerged at the end of the last century till now. The "two brothers" ----- government and self-regulatory organization of the forex industry has learned to the technique that to control and regulate the foreign exchange (forex) broker with the internet.
The higher extent that China participates in global economy, the more needs and times people go abroad. No matter which situation, what must be needed is to exchange certain foreign currencies, involving the buying and selling of foreign exchange (forex).
For the professionals who do foreign exchange investment and forex trading, they are absolutely skilled to possess professional foreign exchange (forex) trading knowledge and regard the foreign exchange (forex) trading as a kind of finance management means and tool. However, as for the individuals, how to choose a cost-effective way to exchange the foreign currencies?
First of all, it is to determine an appropriate exchange time, because the foreign exchange (forex) price is changing continuously and always displaying definite trend in a certain period time.
And then, you should take good advantage of the currency exchanging calculator software. Many people neither know the market quotation of foreign exchange (forex) nor how to calculate the currency exchanging, thinking those thing done by the banks. Actually, nowadays many online financing management website all provides foreign exchange (forex) converting calculator software for the consumers.
Finally, it is to use the arbitrage techniques cleverly, particularly involving the large number of foreign exchange (forex). With increasing of people's economic transaction in oversea market, buying the foreign exchange (forex) becomes the frequent problem that people face with.
If they can take reasonable measures and actions, of course, they can accumulate certain techniques on buying foreign exchange (forex) trading, thus to save lots of spreads of buying foreign exchange (forex) .
The foreign exchange (forex) reserves have high risks because the U.S dollar takes large proportion in it. As the largest foreign exchange (forex) reserves holder all over the whole world, China always regards the U.S dollar as the heavy capitals in foreign exchange (forex) reserves.
Within China foreign exchange (forex) capitals, there are over 60 percent of U.S dollar capitals. By the end of June, the balance of national foreign exchange (forex) is 2.4543 trillion U.S dollars. Actually, since October last year, China's foreign exchange (forex) reserves were in the state of reducing Treasury debts.
The director of the China Foreign Exchange Investment Research Institute, Tan Yaling thinks that China only buying Treasury debts is risky, that is, laying all of the weighting on only one bargaining chip, the trend for foreign exchange (forex) reserves will irreversible when the risk coming.
The member of Chinese Academy of Social Science Faculty and the former member of Central Bank Monetary Committee, Yu Yongding said that China foreign exchange (forex) reserves already greatly exceeded the need for Treasury debts and over-centralized in U.S dollar reserves capital.
Therefore, China should reduce the amount of U.S dollar reserves capital and change part of U.S dollars into other kind of monetary reserves capitals.
What China is trying to do now is to diversify and adjust the structure and deployment of foreign exchange (forex) capitals, which view from the long term; it is good both for
China's action of reduction the Treasury debts and accumulating euro, Japanese Yen and Australia dollars showed that China foreign exchange (forex) reserves accelerate its diversified pace.
Being the largest Treasury debt holder, under the context of U.S dollars stumbling endlessly, China accelerates the pace of diversifying foreign exchange (forex) reserves.
Recently, the national debt holder data released by the countries showed that China State Administration of Foreign Exchange is starting to carry out a new round of foreign exchange (forex) reserves adjustment with a relatively large width.
The blasting fuse is the U.S dollar into the down cycle while euro has the sign of bottoming.
The sign is the reduction of Treasury debts, which is the largest scale reduction this year of China foreign exchange (forex) reserves. On the other hand, China foreign exchange (forex) reserves are also actively absorb other kind of monetary capitals, is took actions to configure the foreign exchange (forex) reserves with euro, yen and Australia dollars.
Exploring its reasons of foreign exchange (forex) reserves diversification, that is, the proportion the U.S dollar takes in the foreign exchange (forex) reserves is so large that the foreign exchange (forex) reserves face with high risks.
Diversified investments of foreign exchange (forex) reserves can effectively prevent the sharply depreciation of USD from spoilage.
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