Once again rumors fly regarding Chinese foreign reserve. I already received an email from one of the panic mongers screaming that “China is dumping USD” if favor of other currencies. This new “revelation” is supposedly based on a statement by one of the Chinese central bank’s officials. However, according to more reputable sources, no official statement have been issued regarding this matter. Mr. Yi Gang, a central bank vice governor, told reporters that diversification of foreign reserves is a long term policy, without getting into any details. Absolutely nothing new or even remotely interesting. This process has been going on for a long time now. It must be that putting “China” and “foreign reserves” together makes for good headline, one more scare for the Dollar.
Speak of the devil. Even my local paper got in on the act last week, publishing an alarmist story about USD. Subject was the 1.5000 level of EUR-USD. Now, currency is not a subject of daily or even regular coverage in local press, it starts to surface when it becomes a “hot” topic. This goes for all other financial markets outside of stocks, such as commodities, normally after a prolonged move. When people who clearly have no business talking about something, all of a sudden become “experts”- watch out. This could mean that market of interest could be very late in its move. Our paper has fantastic record of developing interest in “hot” markets at precisely the wrong time. It happened to Canadian Dollar two years ago, grains, oil at the top last year and bottom this year and many others. Perhaps it is time to start looking at weekly charts of Dollar crosses, using Seattle Times story as a contrarian indicator?
New China scare.