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China hold $1 trillion in currecy reserves
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cashiertan
Elite |
17-Nov-2006 02:03
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either way, i am sure china will move the worlds market like what usa did last time. |
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zhuge_liang
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17-Nov-2006 00:28
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China may also use its reserves to increase its gold holdings. |
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cashiertan
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16-Nov-2006 23:18
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china is slowly but surely moving the world currency market on its own.. |
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scotty
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16-Nov-2006 22:09
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Hi maxsyn, Thanks for the article... but how do you think this will affect us? |
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maxsyn
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16-Nov-2006 21:47
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Nov. 16 (Bloomberg) -- The People's Bank of China, which holds $1 trillion in currency reserves, has been buying yen, Deputy Governor Wu Xiaoling said. Asked whether the central bank had been purchasing the currency, Wu said: ``We have.'' She declined to say if the pace of buying has increased. ``We have been holding Japanese yen in our foreign exchange reserves for many years,'' she added, speaking on the sidelines of a Bank Indonesia conference in Bali. Central banks in Russia, Switzerland and New Zealand are increasing holdings of yen, anticipating the currency will rebound from a 20-year low on rising interest rates and the longest economic expansion since World War II. China is diversifying its reserves, about two-thirds of which are held in dollars. The nation's investors own $339 billion of Treasuries, the second-largest overseas holding after Japan. ``They seem to be testing the water and moving toward more diversification away from the dollar and into the yen and probably the South Korean won too,'' said Nizam Idris, a currency strategist at UBS AG in Singapore. ``Though they're not selling dollars to buy yen, just buying less of the dollar.'' The yen rose as high as 117.76 per dollar before trading at 118.06 at 3:52 p.m. in Tokyo, compared with 118.02 late in New York yesterday. In October, it was at the lowest since 1985 against currencies of major trading partners, according to a monthly Bank of Japan index. South Korea's won and the pound snapped three-day losing streaks. The won rose 0.4 percent to 937.50 against the dollar, the pound was at $1.8878. The euro fetched $1.2818 from $1.2828. Rising Reserves ``China may also diversify into euro, South Korea's won and the British pound, which are the currencies of the mainland's biggest trading partners,'' said Ha Jiming, chief economist in Beijing at China International Capital Corp., the nation's largest investment bank, and formerly an economist at the International Monetary Fund. China may also be seeking to raise the value of the yen as it permits gains in the yuan, said Peter Morici, an economics professor at the University of Maryland. The yuan has risen 2.6 percent this year, in part as it responds to demands from some U.S. lawmakers who accuse China of artificially keeping the currency low to promote exports. By contrast the Japanese yen is little changed in 2006. ``China could push up the values of their currencies to ensure that it did not take up an undue share of the burden of currency realignment,'' said Morici in an interview today. ``Since most Asian currencies are convertible, it could buy lots of those currencies.'' Wu said the central bank will ``steadily advance'' its currency reforms and that companies and households have gradually adapted to a floating exchange rate. Tightening Policy China's reserves continue to swell as it buys dollars to prevents the yuan from appreciating too rapidly, after ending the currency's fixed link to the dollar in July, 2005. Foreign- currency reserves have increased from $794 billion a year ago. China's central bank has increased interest rates twice this year and raised the amount of deposits lenders must hold as reserves three times to help drain excess cash in the financial system to curb investment and lending. ``Whether we will adjust the requirement is not so based or not pointed to the general economy but to the liquidity in the market, based on the double surplus in both the current and the capital account,'' she said. ``It's up to you to decide whether China has excess liquidity or not.'' China's Growth Gross domestic product increased 10.4 percent at an annual rate in the third quarter, the third straight period of expansion faster than 10 percent, as exports surged. U.S. trade deficit with China reached a record $23 billion in September. Alexei Ulyukayev, the Central Bank of Russia's first deputy chairman, on Oct. 16 said he may lift holdings of yen to ``several percent'' of the nation's $273 billion of reserves, from almost zero percent. The Swiss National Bank said 11 days later that it boosted yen investments to 4.9 percent of its 45.4 billion franc ($36 billion) currency reserves, from 3 percent. The Reserve Bank of New Zealand bought yen because Japan's economic outlook has improved, a central bank spokeswoman who asked not to be identified, said last week. The Bank of Japan will increase its key overnight lending rate from 0.25 percent in the first quarter of 2007, according to 10 of 16 economists surveyed by Bloomberg. Four economists said an increase could come next month. ``The risk-reward favors yen buying when it's on its periodic lows,'' said Adrian Foster, director of currency sales at Dresdner Kleinwort in Singapore. ``We've seen several central banks come out to show a tendency to highlight that they're buying around these levels.'' |
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