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Thursday, 8 November 2012

China lose US dollars- two billion a day

 the Bank of China is selling two billion dollars a day in the last few weeks of his huge foreign reserves. Part of the proceeds converted into euro. China has also started to unload U.S. Treasury securities. Experts believe that China's financial priorities are shifted to Europe.

Western banks estimate China's current foreign exchange reserves of $ 3.5 trillions. With China hides its financial transactions in the foreign exchange market, to find the exact figures difficult.

However, the cash flow analysis of China experts from a U.S. bank Merrill Lynch shows that the Chinese authorities were selling dollars from its reserves in the past four weeks, and transferred them to the euro, reports Dow Jones .

Analysts also point to the official data, which reported that in recent years the amount of U.S. Treasury securities in China fell to 300 billion dollars, while in May amounted to 326.1 billion dollars. China is second only to Japan, the largest holder of U.S. Treasury securities. According to specialists in the City of London, the Bank of China for the day "to sell $ 2 billion and a third of them converts to the euro."
China's purchase of European currencies, chief economist of the Criminal Code "Finam Management" Alexander Osin attributed to the fact that China is still interested in investing in the European debt market, which was confirmed by Prime Minister Wen Jiabao during his visit to the EU this week.

Jiabao visited the UK first, and then Germany, where he not only signed several trade agreements on cooperation (with Germany at $ 15 billion), but also announced plans to help Europe with money.

"The problems in Europe show that the state of the global economy remains uncertain and unstable. But these are temporary difficulties. If Europe's problems, China will stretch its helping hand "- Chinese Premier said in Berlin. He added that China is ready to buy a substantial bonds of European countries.
Earlier this year, China announced that it is ready to buy debt of Spain, reached by the time the 6 billion euros. And last November, the representative of China said that the country is ready to buy Portuguese bonds on 4 - 5 billion euros.

"With the completion of QEII (the second phase of quantitative easing) in the debt market of developed countries is highly desirable appearance of a big player, playing on the increase in the price of government bonds whose credibility has decreased due to an increase in inflation expectations, uncertainty about America's borrowing limit and the financial problems of the" periphery "of the EU "  - says the expert.

Bank of China buying euro instead of the dollar in terms of prospects for the next few weeks will boost the euro against the dollar and the investment in risky assets, said Osin. "The dynamics of cross-European currencies since mid week reflects a gradual increase in demand for European financial instruments, which is positive for the shares of regional and global banking industry",  - he said.

If China is going to Europe and help to increase trade, relations with the U.S. had no luck. On the eve of China's Ministry of Commerce said that Washington's position in regard to trade relations between the two countries was controversial. "On the one hand, the United States are dissatisfied with their trade deficit with China, and the other - continue to limit exports to China,"  - said the representative of the agency, referring to the regime of restrictions, which operates in the United States in respect of export of some types of high-tech products.

And at the end of last week, the United States decided to support the Philippines against China over disputed islands in the South China Sea, where there may be are large reserves of oil and minerals. What Chinese Vice Foreign Minister Cui responded: "I think some countries are playing with fire, and I hope that they will not get burned on it. "

In general, investors' interest in the euro strengthened after the eve of the Greek Parliament adopted a general concept of a new five-year program of austerity.
Budget program provides significant cost reductions, tax increases and privatization plan for a total of 78 billion euros. It is essential to highlight Greece the next tranche of aid from the EU and the IMF in the amount of 110 billion euros. On Thursday, the austerity plan was approved by the Greek Parliament crucial vote, according to Bloomberg .

In addition, on Thursday also signed an agreement on participation of banks and insurers in Germany the rescue of Greece, the agency reports referring to the statement by German Finance Minister Wolfgang Schaeuble. The agreement assumes reinvestment of Greek government bonds redeemable in new debt of the country (the so-called rollover) to the end of 2014.

The total amount of investment involved in the agreement banks to Greek debt is around 10 billion euros, of which about 55% - is debt maturing after 2020. The bonds in the amount of approximately EUR 2 billion comes to 2014, exactly as expected, and will help that FCCU Germany undertake to give Greece.

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