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Thread: weekend commentary - foreign investors getting extremely skittish re US dollar ...

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    Default weekend commentary - foreign investors getting extremely skittish re US dollar ...

    (snip)"

    Sovereign funds cut exposure to weak dollar

    Some of the world’s largest sovereign wealth funds are seeking to scale back their exposure to the US dollar in a sign of global concern about the currency.

    One big sovereign fund in the Gulf has cut its dollar-denominated holdings from more than 80 per cent a year ago to less than 60 per cent, while China’s State Administration of Foreign Exchange (SAFE) has been looking to strike deals with private equity firms in Europe as a part of a strategy to reduce its dollar holdings.
    *snip*
    The shift at China’s SAFE is significant because it holds the majority of the country’s $1,600bn in foreign currency reserves in dollar instruments and has lagged behind other governments, such as Singapore, in diversifying its currency exposure. SAFE has been holding talks with Europe-based private equity firms about putting billions of dollars into their latest funds, precisely because these funds are not dollar-denominated, say people familiar with the matter.

    By allocating money to Europe-based private equity firms, SAFE could diversify away from the dollar, at least at the margin, without spooking the currency markets and driving the dollar down in a disorderly manner.

    In addition, SAFE is encouraging the private equity firms with which it has relationships to make investments in natural resources companies in markets outside the US – in part, to hedge its exposure to the dollar.



    Booo! By Halloween, we will see lots of spooks scaring investors. The Chinese, the Arabs, all the pirates, everyone is trying to palm off everything to Uncle Sam so they can tip toe away and leave us holding the bag which will then be worth $0 since no one wants to buy it. World trade will collapse, of course. They worry about this. They feel, there is still some unsold assets and physical stuff in the US so they will let us limp along but they are now worried about the government free money hand outs which are very, very inflationary.

    Note that these people are seeking 'SAFE' havens. This is IMPOSSIBLE. The hag we call 'inflation' can go through brick walls. Being the sister of Death, she can enter deep bank vaults. She can fly to the furthest corners of the earth which is easy since she is from the Outer Darkness which is greater than the entire universe! She cannot be stopped except by the infinity money makers giving up and surrendering to her. This means no more debts until the capital base is built up again."(snip)

    from

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    Default Re: weekend commentary - foreign investors getting extremely skittish re US dollar ..

    US dollar trade weighted exchange index:

    http://research.stlouisfed.org/fred2...DTWEXB?cid=105

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    Default Re: weekend commentary - foreign investors getting extremely skittish re US dollar ..

    ^^^ That's almost the exact reverse of a US dollar denominated oil price chart - at least for the past 10 years or so !!!!

    More germain to this thread, the declines in the trade weighted dollar index don't really have a direct and immediate impact on Americans living inside the USA, since it always takes time for changes to 'percolate' their way into retail prices / employment levels / corporate profits etc. However, Americans outside the USA see the impact immediately when their US dollar paycheck must buy goods priced in Euros or Yen or whatever currency is used in the country they're living in.

    Foreign investors see the exact same immediate impact, since they originally bought US treasuries or stocks or corporate bonds with their own Euros or Yen, and must reconvert back to Euros or Yen or whatever when those US treasuries or stocks or corporate bonds are sold !!! Thus a Belgian Dentist who invested his Euros in US treasury bonds paying 6% interest a couple of years ago has indeed seen a 12% gain in US dollar terms, but when reconverted to Euros he has actually LOST 3-4-5% net of all gains and losses. Thus the more that US FED action tanks the US dollar's exchange rate, the greater the potential losses for the Belgian Dentists (and Chinese gov't, and Middle Eastern Oil Sheiks etc.), the more reluctant they will be to risk their money on future 'loans' to America (via US treasuries purchases), and the higher the interest rate they will demand in compensation for the additional exchange rate risk they would be taking.

    ~
    Last edited by Melonie; 07-20-2008 at 05:19 AM.

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    China's growth rate may dip to 9.9%

    China's growth rate may dip to 9.9%PrintMailEconomic growth in China is expected to hit 9.9 percent this year and 9.7 percent in 2009 while in emerging East Asia it will moderate to 7.6 percent in 2008 and 2009 from 9 percent in 2007 due to a global economic slowdown, sharp rise in food and energy prices and volatile financial markets, said a report by the Asian Development Bank (ADB).The region's growth outlook is vulnerable to a higher-than-expected spike in inflation, protracted slowdown in the US and any further tremors in global financial markets, said the July issue of the Asia Economic Monitor (AEM).Another ADB report in April forecasted that China's economy would expand by 10 percent this year and 9.8 percent the next.The worse-than-expected US economy has exacerbated global worries that the economic slowdown across the globe may continue following the revelations that government-sponsored Fannie Mae and Freddie Mac are in serious trouble. This will have an impact on the Chinese economy.Related readings: Economy grows 10.4%, inflation eases China's growth rate falls for fourth quarter China can afford a 'mild slowdown' Wen stresses steady, fast growth, inflation control "The US economy is gloomier than people expected and it will take more time for it to recover," said Zhuang Jian, an economist from ADB in Beijing. But he said even if China's economic growth slowed to 9.9 percent this year, it would be a "fairly good" rate.The AEM report said the region's policymakers were caught in the pincer grip of slowing growth and rising inflation.It warns that inflation will continue to pose a serious challenge to policymakers across the region, including China. Inflation is expected to rise to 6.3 percent for the region, more than double the rate of the past 10-year average. The core inflation, a measure of price increases that excludes food and energy costs, is rising in the region, a sign that a more broad-based second-round price effect may be under way, it said.China has seen its consumer inflation drop to 7.1 percent in June from the peak of 8.7 percent in February. But analysts said the possible energy price liberalization may make inflation rebound in the coming months."Rising inflation is a serious threat to the region's sustained, strong growth as high import costs of food and fuel threaten to trigger a price and wage spiral, unleashing more inflation," said Lee Jong-wha, head of ADB's office of regional economic integration.Growth in ASEAN member economies is expected to ease by 1 percentage point to 5.5 percent in 2008, according to the semi-annual AEM.

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