China is considering plans to allow investment in overseas securities and insurance within the annual individual quota of US$50,000, a foreign exchange official said on Friday, in a move that could signal a slight easing of the country's strict capital controls.That last sentence tells me nothing will happen if markets don't cooperate. They're still at the mercy of the eurodollar.China will push forward with the opening up of its financial derivative market in 2021, Ye Haisheng, the head of capital account management department at the State Administration of Foreign Exchange (SAFE), told China Forex magazine, a magazine under the administration.
"We will study the impact on China's balance of payments, yuan exchange rates and financial markets from overseas unconventional stimulus policies," he said.
Measured against M2, China's forex reserves in dollars are down to 9.3 percent of money supply.
Reserves become more volatile the more they are dedollarized. If the dollar is in a bear market, macro trends will work in China's favor. If the dollar surprises the market and turns higher again, China is more vulnerable than before. As for the U.S. Dollar Index, it isn't looking too good at the moment. The chart has turned a little more bullish in the short-term, but only a little. The trade weighted U.S. dollar, a broader measure that includes currencies such as the Chinese yuan, is coming up on major support. If the dollar breaks support, China will have the wind at its back and the capital account will probably open a little. If the greenback reverses, the narrative around the global economic recovery will shift quickly and we could be talking about yuan devaluation by the autumn again. The trade weighted dollar is about 1 percent away from support.
No comments:
Post a Comment