China Appreciation Day.
Posted by Phil Flynn I PFG Best Research • Tuesday, March 9. 2010 • Category: Rohstoffe
Oil prices are under a bit of pressure to start the day as attention turns again to the forex markets. Comments from China about their currency and their foreign exchange reserves are capturing the attention of traders across the commodity spectrum. Is it possible that the Chinese are on the verge of letting the Yuan appreciate for the first time since July of 2008?
Market Watch News reported that Chinese central bank Gov. Zhou Xiaochuan said China will in due course move away from its current currency-exchange policy, indicating Beijing doesn't plan to keep the Yuan’s de-facto peg to the U.S. dollar indefinitely. These comments, as well as comments surrounding their reserves are giving a boost to the dollar and helping to bring inflated oil back down to earth. Oil prices have been supported by China in many ways and we are just not talking about demand. China’s peg to the dollar, or should we say re-peg to the dollar, has created an excess of printed Yuan’s. The Chinese re-pegged their currency to the dollar as the rising Yuan caused China to lose manufacturing jobs as their exports became more expensive. So China went back to its tried and true formula of pegging its currency to the dollar. Chinese’s stimulus, along with the dollar peg, has created the perfect scenario for the Chinese to buy more oil driving up the price and doing no favors to the strength of the green back. The Chinese peg is another weight on the dollar making oil more expensive in dollar terms. Obviously if China lifts its dollar peg this will be bearish for oil, the question is how bearish. Well that depends how much room they give the Yuan to float and when. Gov Xiaochuan says, "Sooner or later, we will exit [these] policies. Of course maybe that means sooner rather than later.
IFAOnline says that China could end its near two-year currency peg on the dollar as soon as next month, according to respected economist Professor Nouriel Roubini. They say that Prof Roubini believes the Beijing government will authorize a 2% increase against the dollar initially, followed by a further 1%-2% strengthening over the next 12 months. "They will move by a token amount. The world is much cloudier in every dimension. They are super cautious."
Also comments about the Chinese appetite for gold may have an impact on commodities. Market watch reported that China's appetite for gold as a way to diversify its foreign-exchange reserves is limited because of the metal's poor returns over the past 30 years, the nation's foreign-exchange regulator was cited as saying in a report Tuesday. (What, doesn’t he believe G. Gordon Liddy?) Marketwatch says that Yi Gang, director of China's State Administration of Foreign Exchange, said China's gold reserve, at 1,054 metric tons, was the fifth-largest in the world, Dow Jones Newswires reported, citing comments by Yi at a press conference at the National People's Congress. But Yi downplayed any desire to add the holdings as a strategy to diversify the nation's $2.4 trillion foreign exchange stockpile. "Gold is not a bad asset, but currently a few factors limit our ability to increase foreign-exchange investment in gold," Yi was quoted as saying. A precursor to another China purchase perhaps?
These types of stories are a reminder how the commodity bull market is built on shaky ground. When you build a base on printed money and central bank currency pegs, we know it creates bubbles that can easily burst. Make sure you get out before it does. Call me for the latest updates at 800-935-6487 email me at pflynn@pfgbest.com to open your account. And as always check me out every day on the best in business news in town, the Fox Business Network.
Phil Flynn
Senior Market Analyst
800-935-6487
312-563-8344
pflynn@pfgbest.com
Phil Flynn is Energy Analyst and General Market Analyst with PFGBEST (www.pfgbest.com). Phil is one of the world’s leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil’s market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, traders and global media.
Because he has been available to media around the clock, even during some of the most turbulent market periods in history, and because he has built a solid reputation for accuracy in his market analysis and forecasts, through thousands of interviews and broadcast appearances for more than a decade, Phil Flynn has become a headline-making name even as he continues to provide expert advice and customer care to his proprietary trading account clients.
Media highlights include: CNN, CNBC, Bloomberg, ABC, CBS with Katie Couric, NBC’s “Today Show” and “Nightly News with Tom Brokaw”, FOX’s “O’Reilly Factor”, PBS’s “The Newshour with Jim Lehrer” and “Nightly Business Report”, MSNBC’s “The News with Brian Williams”, Wall Street Journal Report, The Wall Street Journal, Business Week, Investor’s Business Daily, The New York Times, The Los Angeles Times, Chicago Tribune, Associated Press, The Toronto Globe & Mail, Houston Chronicle, Futures Magazine, National Public Radio’s Marketplace, a chat with the President of the United States, and many more venues.
You can read Phil’s daily market analysis and blogs at www.pfgbest.com.
PFGBEST is among the largest non-clearing U.S. Futures Commission Merchants, with customers, affiliates and brokerage offices in more than 80 countries. The company is a leader in sustainable investing through diversified products including managed funds, futures, forex, options, full-service and discount brokerage, trader education, market research, and direct online futures trading through its BESTDirect™ platform, and numerous other platforms and applications.
Phil’s commitment to and experience in futures trading is documented in two books, The Mind of a Trader (Financial Times/Pitman,1997), and Trading Online (publisher, date), both by Alpesh B. Patel. Phil is a lifelong resident of Illinois. He attended DaleyCollege in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange.
Disclaimer
There is a substantial risk of loss in trading futures and options.
The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers, directors, employees and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
Market Watch News reported that Chinese central bank Gov. Zhou Xiaochuan said China will in due course move away from its current currency-exchange policy, indicating Beijing doesn't plan to keep the Yuan’s de-facto peg to the U.S. dollar indefinitely. These comments, as well as comments surrounding their reserves are giving a boost to the dollar and helping to bring inflated oil back down to earth. Oil prices have been supported by China in many ways and we are just not talking about demand. China’s peg to the dollar, or should we say re-peg to the dollar, has created an excess of printed Yuan’s. The Chinese re-pegged their currency to the dollar as the rising Yuan caused China to lose manufacturing jobs as their exports became more expensive. So China went back to its tried and true formula of pegging its currency to the dollar. Chinese’s stimulus, along with the dollar peg, has created the perfect scenario for the Chinese to buy more oil driving up the price and doing no favors to the strength of the green back. The Chinese peg is another weight on the dollar making oil more expensive in dollar terms. Obviously if China lifts its dollar peg this will be bearish for oil, the question is how bearish. Well that depends how much room they give the Yuan to float and when. Gov Xiaochuan says, "Sooner or later, we will exit [these] policies. Of course maybe that means sooner rather than later.
IFAOnline says that China could end its near two-year currency peg on the dollar as soon as next month, according to respected economist Professor Nouriel Roubini. They say that Prof Roubini believes the Beijing government will authorize a 2% increase against the dollar initially, followed by a further 1%-2% strengthening over the next 12 months. "They will move by a token amount. The world is much cloudier in every dimension. They are super cautious."
Also comments about the Chinese appetite for gold may have an impact on commodities. Market watch reported that China's appetite for gold as a way to diversify its foreign-exchange reserves is limited because of the metal's poor returns over the past 30 years, the nation's foreign-exchange regulator was cited as saying in a report Tuesday. (What, doesn’t he believe G. Gordon Liddy?) Marketwatch says that Yi Gang, director of China's State Administration of Foreign Exchange, said China's gold reserve, at 1,054 metric tons, was the fifth-largest in the world, Dow Jones Newswires reported, citing comments by Yi at a press conference at the National People's Congress. But Yi downplayed any desire to add the holdings as a strategy to diversify the nation's $2.4 trillion foreign exchange stockpile. "Gold is not a bad asset, but currently a few factors limit our ability to increase foreign-exchange investment in gold," Yi was quoted as saying. A precursor to another China purchase perhaps?
These types of stories are a reminder how the commodity bull market is built on shaky ground. When you build a base on printed money and central bank currency pegs, we know it creates bubbles that can easily burst. Make sure you get out before it does. Call me for the latest updates at 800-935-6487 email me at pflynn@pfgbest.com to open your account. And as always check me out every day on the best in business news in town, the Fox Business Network.
Phil Flynn
Senior Market Analyst
800-935-6487
312-563-8344
pflynn@pfgbest.com
Phil Flynn is Energy Analyst and General Market Analyst with PFGBEST (www.pfgbest.com). Phil is one of the world’s leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil’s market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, traders and global media.
Because he has been available to media around the clock, even during some of the most turbulent market periods in history, and because he has built a solid reputation for accuracy in his market analysis and forecasts, through thousands of interviews and broadcast appearances for more than a decade, Phil Flynn has become a headline-making name even as he continues to provide expert advice and customer care to his proprietary trading account clients.
Media highlights include: CNN, CNBC, Bloomberg, ABC, CBS with Katie Couric, NBC’s “Today Show” and “Nightly News with Tom Brokaw”, FOX’s “O’Reilly Factor”, PBS’s “The Newshour with Jim Lehrer” and “Nightly Business Report”, MSNBC’s “The News with Brian Williams”, Wall Street Journal Report, The Wall Street Journal, Business Week, Investor’s Business Daily, The New York Times, The Los Angeles Times, Chicago Tribune, Associated Press, The Toronto Globe & Mail, Houston Chronicle, Futures Magazine, National Public Radio’s Marketplace, a chat with the President of the United States, and many more venues.
You can read Phil’s daily market analysis and blogs at www.pfgbest.com.
PFGBEST is among the largest non-clearing U.S. Futures Commission Merchants, with customers, affiliates and brokerage offices in more than 80 countries. The company is a leader in sustainable investing through diversified products including managed funds, futures, forex, options, full-service and discount brokerage, trader education, market research, and direct online futures trading through its BESTDirect™ platform, and numerous other platforms and applications.
Phil’s commitment to and experience in futures trading is documented in two books, The Mind of a Trader (Financial Times/Pitman,1997), and Trading Online (publisher, date), both by Alpesh B. Patel. Phil is a lifelong resident of Illinois. He attended DaleyCollege in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange.
Disclaimer
There is a substantial risk of loss in trading futures and options.
The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers, directors, employees and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
0 Comments
Add Comment