January 23, 2004
Dollar continues slides, Chinese ready to cut it loose.
The Financial Times
reports that the dollar had another bad week, falling against the euro, pound and yen. It didn't do that much against the euro, only up 4 cents at the peak, but the pound moved sharply up, reaching $1.85/pound before slowing down. It's becoming increasingly clear that the national banks are not going to be able to do much, and that not much is expected of the coming G7 meeting either.
The euro climbed to a peak of $1.2775 on Friday from a low of $1.2335 on Monday, before profit-taking took it back to $1.2610.
... "The main debate appears to be whether we make new euro-dollar highs before or after these two events," said Paul Bednarczyk at 4Cast economic consultancy.
... The pound reached $1.8522 before easing to $1.821.
The dollar's slide against the yen was pronounced after a mid-week rally faded rapidly. A surprise easing of monetary policy by the Bank of Japan on Tuesday had helped the dollar to Y107.87 - a five-week high. But yen bulls took support from data showing very strong portfolio inflows into Japan in spite of suspected intervention by the BoJ, and the dollar slid to Y105.76 on Friday.
More significantly, Guy de Jonquiéres in Davos
reports that it looks more and more like the Chinese will let the renmimbi float by the end of the year, if not before.
A leading Hong Kong businessman with extensive interests in China on Thursday suggested that Beijing might decide to allow the renminbi to appreciate before the end of the year.
Victor Chu, chairman of First Eastern Investment Group, said the country's currency was set for long-term appreciation and that there was a "nine-month window" in which to invest in Chinese assets.
"The time to go into China is now," he said, adding that in 2004 - the year of the monkey in the Chinese calendar - "Chinese assets will be good monkey business."
Mr Chu said the timing of a change in currency policy was still an open question, but that once China made up its mind, it did it "very quickly."
He believed the change would be achieved by pegging the renminbi against a "basket" of several currencies or by widening the bands within which the Chinese currency fluctuates.
If you're interested in what's happening at the Davos World Economic Forum, the
Financial Times has a
special report on it. This is where many of the world's economic big-wigs get together and decide the most efficient and politic way in which to rip the rest of us off. (Pardon my cynicism, but like I said
before, it's virtually all rich white men. :)
