Board-Ansicht
Mix-Ansicht- und schon wieder 'der Dollar'! - Emerald, 02.08.2005, 06:38
- Re: und schon wieder 'das Gold'! - Alana, 02.08.2005, 07:57
und schon wieder 'der Dollar'!
-->von www.dowtheoryletters.com
Dollar -- One of the burning questions of the day is whether with its new basket of currencies, has China cut itself lose from the dollar? I'm thinking that the answer is yes. And that may be, by far, the most important thing about the new Chinese basket of currencies.
Remember, one of the main reasons interest rates in the US have remained low is that China has been taking in a massive amount of US dollar, and then turning around and buying US Treasury securities with those dollars. Now that the renminbi is pegged to a basket of currencies rather than just the dollar, China may be cutting back on in its buying of US bills and notes. If that does occur, interest rates will be rising here (which they are now doing!).
The China story and the declining dollar is hitting the 10 year T-note already. As the T-note declines, it's yield rises, as we see on the chart below. And in turn, as the yield on the bellwether 10 year T-note rises, the housing industry starts to get just a little bit nervous, since the two bases of the housing boom are low interest rates and ample liquidity.
In all of this discussion, this is the major point I want to make. When China switched from pegging the renminbi to the dollar to pegging the renminbi to a basket of currencies -- everybody said,"Yeah, big deal, it's just a two percent increase in the dollar value of the renminbi.
But it is a very, very big deal!
WHEN CHINA SWITCHED ITS PEG FROM THE DOLLAR TO A BASKET OF CURRENCIES, IT EFFECTIVELY DISENGAGED THE RENMINBI FROM THE DOLLAR. THAT'S THE IMPORTANT POINT WHICH NOBODY SEEMS TO UNDERSTAND. CHINA'S CURRENCY IS NO LONGER TIED TO THE DOLLAR. THE RENMINBI IS NOW ON ITS OWN.
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