logo
  Join        Login             Stock Quote

China Buying Into Europe May Be Attempt To Push Dollar Down

 June 28, 2011 09:38 AM


The big news this week is China's continuing big move into European debt, giving the EU a little bit more wiggle room as it makes contingency plans for Greece's probable departure.  China doesn't take actions this big without attempting to hit several targets at once.

Target one is diversification.  China has been making noise for at least a year about diversifying its foreign exchange holdings away from Treasuries.  Telegraphing such an intent for so long without following through would have harmed China's credibility in capital markets. 

Target two is the U.S. dollar's reserve status.  Buying euros must precede buying European debt.  This props the value of the euro against the U.S. dollar; indirectly, a weaker dollar makes the renminbi stronger with no need for a forced revaluation. 

Target three is U.S. foreign influence.  Forcing Europe to become beholden to Chinese capital will make Brussels think twice before committing to U.S. pet projects like expanding NATO, increasing European defense spending, or funding economic development projects in emerging markets that would otherwise compete with China's drive for resources.

China is playing its weakening hand well.  Buying European debt will give it some cushion against insolvent banks and real estate projects at home, for at least as long as the European experiment in unity lasts. 
iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageInitial Jobless Claims Rose Unexpectedly

Claims unexpectedly rose in the latest report through last weekend to breach 300,000 for the first time read on...

article imageAll Quiet on the Record High Front

What can we glean from the media’s lack of attention to the market’s recent record read on...

article imageThe Chip Maker Short Sellers Should Be Watching

Investing in semiconductor stocks is always tricky. Industry cycles can lead to bumps in the road for the read on...

article imageChicago Fed: US Economic Growth Slowed In October

The pace of US growth slowed more than expected in October, according to this morning’s update of the read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.