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Is China Behind the Weak Dollar?: Weekly May 3, 2014

Is China Behind the Weak Dollar?: Weekly May 3, 2014

6 Years ago | May 04, 2014 00:00:00


Jay Meisler has come up with an interesting theory about where EUR demand has been coming from recently. We KNOW that China has been actively driving the CNY weaker to stimulate economic growth via their export sector. That means the central bank has been BUYING USD and SELLING CNY in the forex markets to drive the CNY weaker. Thus the central bank has been accumulating excess USD that it needs to do something with. These USD initially go into their forex reserves. We KNOW also that the PBOC has a forex Reserve diversification policy, which means that a number of those dollars are being switched into EUR, GBP, AUD, JPY, etc. Presumably they also have been buying U.S. treasuries with the dollars they continue to hold.

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