USD

oops ..tp too early may re enter usdchf long usdx strengthens

China Goes on Japanese Bond Shopping Spree


China continues to be vocal about its reserves diversification and still mum on the details. Its State Administration of Foreign Exchange (SAFE) is now posting soothing Q&As on its website in order to calm fears about its $2.4 trillion cash mountain without actually offering any specifics about recent changes in its allocation.

However, at least one detail has come to the fore. China has markedly increased its purchases of Japanese bonds to the tune of about $6.2 billion in the first quarter of 2010.

From todays Wall Street Journal:

The statement reiterated Chinas rationale for diversifying its reserves, long dominated by dollar assets, saying it can help control risk and maintain the stability of the overall value of reserves.

China, the biggest holder of U.S. government debt, has ramped up purchases of Japanese government bonds this year, apparently part of its diversification effort. China bought some $6.17 billion in Japanese government bonds in the first four months of the year, more than double the full-year record it set in 2005.

The statement said that Chinas investment in U.S. debt is a market investment action and that whether to increase or reduce holdings of U.S. sovereign debt is entirely a normal investment operation.

Speculation Chinas SAFE reserves abounds, especially given its recent comments about decreased investment in US and euro-zone debt as well as its insistent dismissal of gold as a useful reserves asset despite speculation that the country is already buying gold directly from its domestic producers on an ongoing basis.

Yesterday, the WSJ also noted that the spiking Japanese bond purchases are a dramatic departure from last year. During 2009, China net sold roughly 80 billion yen (nearly $1 billion) in Japanese securities.

The SAFE reserves guessing game will continue and the stakes remain high. You can read more details in The Wall Street Journals coverage of China pouring into Japanese bonds and saying it wont threaten with US debt.

China Goes on Japanese Bond Shopping Spree
by Rocky Vega
China continues to be vocal about its reserves diversification and still mum on the details. Its State Administration of Foreign Exchange (SAFE) is now posting soothing Q&As on its website in order to calm fears about its $2.4 trillion cash mountain without actually offering any specifics about recent changes in its allocation.

However, at least one detail has come to the fore. China has markedly increased its purchases of Japanese bonds to the tune of about $6.2 billion in the first quarter of 2010.

From todays Wall Street Journal:

The statement reiterated Chinas rationale for diversifying its reserves, long dominated by dollar assets, saying it can help control risk and maintain the stability of the overall value of reserves.

China, the biggest holder of U.S. government debt, has ramped up purchases of Japanese government bonds this year, apparently part of its diversification effort. China bought some $6.17 billion in Japanese government bonds in the first four months of the year, more than double the full-year record it set in 2005.

The statement said that Chinas investment in U.S. debt is a market investment action and that whether to increase or reduce holdings of U.S. sovereign debt is entirely a normal investment operation.

Speculation Chinas SAFE reserves abounds, especially given its recent comments about decreased investment in US and euro-zone debt as well as its insistent dismissal of gold as a useful reserves asset despite speculation that the country is already buying gold directly from its domestic producers on an ongoing basis.

Yesterday, the WSJ also noted that the spiking Japanese bond purchases are a dramatic departure from last year. During 2009, China net sold roughly 80 billion yen (nearly $1 billion) in Japanese securities.

The SAFE reserves guessing game will continue and the stakes remain high. You can read more details in The Wall Street Journals coverage of China pouring into Japanese bonds and saying it wont threaten with US debt.
http://online.wsj.com/article/BT-CO-20100706-702002.html
http://online.wsj.com/article/SB10001424052748704545004575352553747891766.html

http://www.zerohedge.com/article/china-promises-not-use-nuclear-option-buy-gold-dump-us-assets?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+zerohedge/feed+(zero+hedge+-+on+a+long+enough+timeline,+the+survival+rate+for+everyone+drops+to+zero)

Reuters:

"Any increase or decrease in our holdings of U.S. Treasuries is a normal investment operation," SAFE, the arm of the central bank that manages China's official currency reserves, said.

It said it constantly adjusts its portfolio to maximize returns, and any changes to its U.S. Treasury portfolio should be seen in that light and not interpreted politically.

"The U.S. Treasury market is the world's largest government bond market, and U.S. Treasury bonds deliver fair good security, liquidity and market depth with low transaction costs.

"The U.S. Treasury market is a very important market for China," the agency said.

China held $900.2 billion in U.S. Treasuries at the end of April, according to U.S. Treasury data released on June 15.

Bankers say China's total holdings of dollar-denominated assets are much greater, accounting for perhaps two-thirds of its reserves.

"We must recognize that any depreciation of the dollar is relative to other countries, and other countries or regions also have this or that problem," SAFE said.

SAFE is an easy target for domestic critics who question why China has amassed a mountain of reserves instead of investing more at home. The elucidations on its website appear primarily aimed at disarming those critics.

"SAFE will never be a speculator. It mainly seeks to protect the safety of China's FX reserves and ensure a stable investment return," it said.

The agency said it was a financial investor and did not seek management control when it made equity investments.
SAFE also gave a qualified vote of confidence to the dollar.

The agency acknowledged that financial markets were very concerned at one point that massive U.S. government borrowing would drive the U.S. currency lower.

But it said economic conditions elsewhere were also a factor in determining the dollar's trend. The euro zone, for instance, was struggling with high government debt levels.

"We must recognize that any depreciation of the dollar is relative to other countries, and other countries or regions also have this or that problem," SAFE said.

One of the prime concerns of Chinese Internet commentators is that a long-term decline in the dollar or euro will erode the value of SAFE's portfolio.

To that end, SAFE called on the United States and other major countries to take "responsible measures" to maintain the value of their currencies. This meant withdrawing monetary stimulus in a reasonable manner and relying less on deficit spending.

Speaking of Chinese equity investments, whatever happened to those demands for extra funding after Chinese investments in US equities had suffered a dramatic loss in the past few months, and someone somewhere over in Beijing was scrambling to prevent a court martial. Surely, this is yet another indication of just how much China "trusts" the US.

EurUsd- Are we about to confirm a bullish trend?
http://euodootrading.com/eurusd-are-we-about-to-confirm-a-bullish-trend/

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