Asia steps in to support dollar

Discussion in 'Wall St. News' started by Debaser82, Oct 8, 2009.

  1. Can't believe this hasnt been posted yet.

    Asian central banks intervened heavily in the currency markets on Thursday to stem the appreciation of their currencies against the US dollar amid fears that their exports could be losing ground against China.

    The mainly south-east Asian countries have been spurred to defend the competitiveness of their currencies by China’s decision to in effect re-peg the renminbi to the dollar since July last year.

    After allowing the renminbi to appreciate by about 20 per against the US dollar from mid-2005, Beijing re-pegged its currency to the greenback when export growth contracted.

    The greenback hit one-year lows against a raft of regional currencies. The dollar index, which tracks its value against a basket of six main currencies, hit a 14-month low in afternoon trading in New York.

    Jean-Claude Trichet, European Central Bank president, issued a warning about the euro’s strength on Thursday and said that authorities on both sides of the Atlantic would “co-operate as appropriate”.

    Marco Annunziata, chief economist at Unicredit, said: “He clearly tried to signal as convincingly as possible that the eurozone and the US are united in the desire to limit the rise in the euro versus the dollar – but the market is calling his bluff.”

    Gold prices hit an all-time high for the third day in a row, on the dollar’s weakness. Base metals such as aluminium and copper jumped 4 per cent, while crude oil surged almost $3 to more than $70 a barrel.

    The central banks identified by traders as substantial buyers of US dollars included Thailand, Malaysia and Taiwan. Hong Kong and Singapore, which both have managed currency regimes, were also buyers.

    The moves to limit Asian currency appreciation is ammunition for those who warn that the new Group of 20 framework for strong and balanced growth is toothless. Less than a week after the world’s finance ministers and central bankers agreed to foster more balanced world economic growth in Istanbul, Asian officials have intervened to prevent exchange rates playing their part in the process.

    However, traders said that the central bank interventions appeared to be aimed at controlling the pace at which the US dollar declines rather than solely to stop Asian currencies appreciating.

    The Obama administration has not altered its refrain that it believes in a “strong dollar” but is seen as unlikely to intervene in currency markets, particularly as the US Treasury recognises the trade-weighted value is similar to where it was two years ago.
  2. Please.
    the whole East Asian and SE-asian sphere are now under the Chinese sphere of influence like the old imperial days.

    When China says jump, you leap
  3. This isn't so much of a story on a weak USD as it is a tell on how weak the export economy is in Asia right now that is being propped up by currency intervention. If there is a second crash it will originate from the collapse of the export economy in China.
  4. This week has been crazy, the dollar is first page news. It wasnt before! Asia steps in to support gold dollar, until they develop their own consumption that is. Then they let it slide.
  5. Weak USD is in the interest of the US as an "export nation"...Mr. Obama outlined the new policy shift in his own words :

    “We don’t want every single college grad with mathematical aptitude to become a derivatives trader. We want some of them to go into engineering, and we want some of them to be going into computer design.”

  6. Lethn


    lol that isn't going to make much difference? I assume by 'South-Eastern Asia' they mean countries like Burma, Thailand, Cambodia, Laos and Vietnam right?

    Those are some pretty damn poor countries a lot of them and we already know that Japan plans to move away from the dollar and break it's treaty with America with the newly elected primeminister in power ( god I hope he does it ) even if they do it, it's not going to make much difference in the long run unless they somehow have a ton of gold and silver stacked somewhere that we don't know about.
  7. lrm21


    The game is always the same.

    Beggar thy neighbour, or beggar-my-neighbour, is an expression that describes policy that seeks benefits for one country at the expense of others. Such policies attempt to remedy the economic problems in one country by means which tend to worsen the problems of other countries. The term was originally devised to characterize policies of trying to cure domestic depression and unemployment by shifting effective demand away from imports onto domestically produced goods, either through tariffs and quotas on imports, or by competitive devaluation. More recently, beggar thy neighbour policy has taken the form of reducing domestic inflation through currency appreciation. This improves the terms of trade and thus reduces cost-inflationary pressure in the appreciating country but tends to increase cost inflation in the country's trading partners.
    "Beggar thy neighbour" strategies of this kind don't only apply to countries: overgrazing provides another example, where the pursuit by individuals or groups of their own interests leads to sub-optimal outcomes. This dynamic has been called the "tragedy of the commons," though it appears as early as the works of Plato and Aristotle.
    The phrase is in widespread use, and is used in such publications as The Economist[1] and BBC News[2], and presumably originates from the name of the Beggar-My-Neighbour card game.

    Gold standard
    Economic studies have indicated that just as the downturn was spread worldwide by the rigidities of the Gold Standard, it was suspending gold convertibility (or devaluing the currency in gold terms) that did most to make recovery possible.[43] What policies countries followed after casting off the gold standard, and what results followed varied widely.
    Every major currency left the gold standard during the Great Depression. Great Britain was the first to do so. Facing speculative attacks on the pound and depleting gold reserves, in September 1931 the Bank of England ceased exchanging pound notes for gold and the pound was floated on foreign exchange markets.

    The Depression in international perspective.[44]
    Great Britain, Japan, and the Scandinavian countries left the gold standard in 1931. Other countries, such as Italy and the United States, remained on the gold standard into 1932 or 1933, while a few countries in the so-called "gold bloc", led by France and including Poland, Belgium and Switzerland, stayed on the standard until 1935-1936.
    According to later analysis, the earliness with which a country left the gold standard reliably predicted its economic recovery. For example, Great Britain and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which remained on gold much longer. Countries such as China, which had a silver standard, almost avoided the depression entirely. The connection between leaving the gold standard as a strong predictor of that country's severity of its depression and the length of time of its recovery has been shown to be consistent for dozens of countries, including developing countries. This partly explains why the experience and length of the depression differed between national economies.[45]