China to invest less in US dollar

[medeak]

China Set To Reduce Exposure To Dollar
Move Would Probably Push Currency Down

By Peter S. Goodman
Washington Post Foreign Service
Tuesday, January 10, 2006; D01



SHANGHAI, Jan. 9 -- China has resolved to shift some of its foreign exchange reserves -- now in excess of $800 billion -- away from the U.S. dollar and into other world currencies in a move likely to push down the value of the greenback, a high-level state economist who advises the nation's economic policymakers said in an interview Monday.

As China's manufacturing industries flood the world with cheap goods, the Chinese central bank has invested roughly three-fourths of its growing foreign currency reserves in U.S. Treasury bills and other dollar-denominated assets. The new policy reflects China's fears that too much of its savings is tied up in the dollar, a currency widely expected to drop in value as the U.S. trade and fiscal deficits climb.

China now boasts the world's second-largest cache of foreign exchange -- behind only Japan -- and is on pace to see its reserves climb past $1 trillion later this year. Even a slight diminishing of the dollar as a percentage of those holdings could exert significant pressure on the U.S. currency, many economists assert.

In recent years, the value of the dollar has been buoyed by major purchases of U.S. Treasury bills by Japan, China and oil-exporting countries -- a flow of capital that has kept interests rates relatively low in the United States and allowed Americans to keep spending even as debts mount. Some economists have long warned that if foreigners lose their appetite for American debt, the dollar would fall, interest rates would rise and the housing boom could burst, sending real estate prices lower.

http://www.washingtonpost.com/wp-dyn/content/article/2006/01/09/AR2006010901042_pf.html

[Greeby]

1. I think I hear a gurgling noise?

Sound of the plug being pulled? :scared:

[medeak]

2. gold is goooood n/t

[OrangeCountyDemocrat]

5. WHAT HE SAID!!! nt

[unblock]

6. better is a straight anti-dollar bet

this is not a portend of great uncertainty and worldwide inflation that gold thrives on.
it's more a simple shift from an overvalued currency to others.

USD will go down, EUR, GBP, JPY and other currencies will go up.

so just put your money overseas or otherwise invest against the dollar.

imho.

[murray hill farm]

3. Well, we knew it was coming...

and here it is! All the artificial props coming to an end in the usa!

[Canuckistanian]

4. This is not good

Inevitable, maybe, but not good. The Chinese are clearly in the driver's seat.

They may be in a place where they can dictate terms soon.

[Tierra_y_Libertad]

7. Well, we did encourage them to join the "free market". Delicious irony.

"The capitalists will sell us the rope with which we will hang them." - Lenin

[Burried News]

8. Well that will make our exports more attractive - what is it we export?

Oh yeah War.

You're doing a great job Georgie.

[JohnnyRingo]

9. With our huge deficit, we're running the printing presses 24 hours a day

printing money we don't have. It's like writing checks without depositing money, then ordering more checks.

Sending all this newly minted cash overseas hedges inflation, but devalues the dollar against other currency.

With one less country to stash US dollars in, a loaf of bread will soon cost $3.00. Don't ask for a raise though, you working people are killing the corporations.

It seems GW has yet one more self induced dillemna on his hands that we'll all have to suffer for.

Will someone please impeach this Harvard Business School dropout?

[ContraBass Black]

10. So, what happens when other countries stop propping up our currency?

Does the "weak dollar" policy then result in weak dollars?

[tedzbear]

11. If the dollar crashes low enough it will be cheaper to manufacture here...

...than in China. So does that mean our multinational corporations will move their manufacturing back to the USA?