China to Move From Dollar to 'Stronger' Currencies

The dollar slumped to record lows and stock index futures fell sharply early Wednesday after Chinese officials said they would further diversify the nation's $1.43 trillion in foreign reserves in view of a declining U.S. dollar. "We will favor stronger currencies over weaker ones, and will readjust accordingly," said Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing. Siwei's comments sent the euro to a new record high of $1.4703, gold futures up $20 to as high as $848, and oil futures as high as $98.6. At the same conference, Xu Jian, a central bank vice director, said the dollar is losing its exclusive status. "The world's currency structure has changed; the dollar is losing its status as the world currency," Xu said. At least one analyst downplayed Cheng's remarks. "Cheng has a history of speaking out on a range of financial market and economic developments, and his comments are not always accurate," Glenn Maguire of Societe Generale told Bloomberg. In January, Cheng referred to the Chinese stock rally as a 'bubble,' sending markets into a severe tailspin. At the time the Shanghai and Shenzhen 300 Index was just over 2,500 points; it now registers over 5,300.

Sources: MarketWatch, Bloomberg
Commentary: As Long As China's Excess Money Supply Remains, Keep Buying • The China Bubble Can't Last
ETFs to watch: FIX, GXC, PGJ, UUP, UDN

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Comments

[Brian Croner]

Little by little, squeezy squeezy. Gee. 27 European member nations with a European currency that's maybe $1.50. So if I found some outsourcing company that did guru.com for US clients to the whole of Europe, then I could provide my software equity to Europe and receive return for my labor output in something that is more genuine than the US Dollar and is worth more than the the US Dollar, where there's very little worthwhile economic activity to be spending my money on anyway.