The issue of what Chinese are doing with their Forex reserves never really goes away, but recently it had even more attention. Newspaper are once again full of stories about how the Chinese are running away from USD. Hording of gold and rare earth metals, buying $50 billions of SDR’s and even issuing some bonds on their own and sell them to foreigners on Hong Kong exchange. Press takes very alarmist tone when reporting these events, even though they are very small in great scheme of things. For example, so far they only floated 6 billions of Yuan issued debt. They don’t want to, for the time being, make a really big issue out of it, because their own currency  would be pushed higher and it is apparent they want to stay pegged to the dollar for as long as they can get away with it.

Right now we have U.S. Treasury’s economic emissary, David Dollar, visiting China. He has had couple of speaking engagements during which he told his Chinese audience that it makes sense to diversify their holdings into different currencies. This follows article in “London Telegraph”, in which one of Chinese officials complains about US fiscal policies. Mr. Ching Siwei warns that if FED keeps printing money it will lead to inflation in the foreseeable future  and fall in value of USD. To prevent it, they will keep moving reserves to other currencies in incremental amounts. More important question is if our own government adopted a policy of weak dollar, without public disclosure. Or maybe it is a policy of dollar neglect? Or perhaps is it a policy of “We don’t know what to do, so we will not talk about and hope that problem goes away?”. Looks more and more like the last.  To date, though,  Chinese keep buying US debt at steady rate, but the composition of holdings seems to be shifting from longer term to shorter term treasuries.

Friday has been a very quiet day so far. Might as well have taken some time off.  Yen is quietly getting stronger and Kiwi has been somewhat of a mover, still strong after RBNZ rate decision, or indecision. My trade in GBP-CHF is largely right were it started yesterday, after initial fire works. Order was triggered shortly after I had placed it and price ran up to 1.7400.

That breakout turned out to be a spike, rather than a sustained move. Right now price is in a sideways pattern with an upward bias. It will probably keep crawling up, but how fast? This pair behaves quite jittery and I would really like to get out of it before weekend. Will see in about 4-5 hours.  To tie up some loose ends from this week: AUD-CAD trade  from early on has not happened. Entry price has not been reached, so it is no longer valid. At this time no new order is placed. Maybe next week.

Mike K.