Posts by "stationdealer"

Morgan Stanley Explains How The Yuan Hike Will Lead To More Easy Money In America


Now that China has goaded the yuan-bulls with prospects of a near-term yuan-dollar exchange rate adjustment, it faces the risk of 'perverse' capital inflows according to Morgan Stanley's Manoj Pradhan.

Given that the U.S. and Europe will likely maintain extremely accommodative monetary policies, liquidity created by these regions could end up exacerbating China's capital inflow situation. (As 'AAA liquidity' described below)

Morgan Stanley:
Importing AAA liquidity: Capital flows into China may be exacerbated thanks to an unlikely source the euro area. Sovereign risks from the euro area have probably prompted not just the ECB but also the Fed to stay on hold for longer, keeping the AAA liquidity regime intact. The fast-growing economies of the world, particularly the ones with fixed or relatively stable exchange rates, import this excess liquidity, and China is high up on that list.

Which means more foreign exchange reserves China will probably park in U.S treasuries...

In the near future, more capital inflows, higher reserves and lower yields are the likely outcome. As capital inflows increase, Chinas system of capital and credit controls will probably lead to an increase in the size of its holdings of foreign exchange reserves. We believe that at least some of these reserves are likely to find their way back into bond markets, keeping yields anchored. Despite an extremely volatile period in developed markets, US markets and even euro area markets remain a favored destination thanks to their size and depth.

And thus downward pressure on U.S. long-term interest rates... ie. a bias towards easier money in the U.S. financial system. It looks like the U.S. Federal Reserve can continue to rely on China's currency regime as an easy-money ally. Until the day when the yuan doesn't look like a one-way bet, any prospect of a yuan-dollar adjustment will only attract even more capital, creating more Chinese reserves, and thus more potential demand for U.S. treasuries.

CAT you got futures

look at ZBU 30year bond ecbot exp 20th sep

where do you see it in coming months, this week I had a draw down on profits im back down to now in negative territory i went long in early April around 113.75 and came out may 25th at 125. I have no long position on it any more. Now I wonder weather it will go down or not specially with dollar weakness expected through out july to Aug, my sources still say down side is expected but I'm less optimistic now.

EurCad hits an intraday high 1.2845.........Man i should have had more faith in EURCAD I was thinkign of another retest of 127 before 129 to be seen as target.

CADYEN still falling like a lose shoe at 85.64 back from lows of 8538

USDCAD 3 points short of yesterdays high stopped and now at 1.0433, we might just see 1.0485 if new orders emerge higher so far 1.0505 next target.

went long in copper again for $9 move 294.45, target 303.30

selling oil for 74.80 present levels at 76.42

Sources added a Japanese firm selling usdyen early last hour.

AUDYEN 7711 presently headed 7680