Asian Central Banks try to stop currency losses by buying US dollars

[papau]

Mr Cole expects 5% growth in the 4th QTR GDP - interesting.


http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=4080073

Treasuries Helped by Asian Central Banks
Tue January 6, 2004 09:05 AM ET

By Wayne Cole
NEW YORK (Reuters) - Treasuries bounced on Tuesday after several sessions of selling pressure, helped in part by demand from Asian central banks desperate to stem the slide of the U.S. dollar.

Traders reported decent buying from Asian accounts overnight, both private and official, and assumed part of that was attempts by some central banks to slow export-damaging gains in their own currencies.
"The talk is the Bank of Japan has been in repeatedly and the market just assumes much of the dollars bought will end up parked in Treasuries," said one trader at a U.S. primary dealer.

The assumption was understandable given holdings of Treasuries by foreign central banks rose over $170 billion last year to a record $862 billion.

The slide in the dollar was also having secondary effects by depressing global equities and boosting sovereign debt, particularly in the euro zone where the rise of the euro stirred speculation that official interest rates may be cut.

For the moment at least, these factors were outweighing concerns that the dollar's weakness would scare private offshore investors away from U.S. assets.<snip>

[librechik]

1. thank god at least someone has some sense!

unfortunately, now they own us. And how long will they keep it up?

[ze_dscherman]

2. Some sniplets I posted in Stock Market Watch (LBN) about this

Japan signals intention to prevent rise of yen

Japan on Monday signalled its strong intention to prevent a rapid appreciation of the yen in 2004 as traders reported heavy government intervention in the year's first day of foreign currency trading in Tokyo.


Japan has recently replenished its intervention coffers, in a strong sign that it will not allow a rapid rise in the yen to derail its lengthy, but so far fairly shallow, recovery.

Last year, Japan spent a record Y20,000bn ($187bn) on foreign currency intervention, dwarfing the previous recent high of Y7,600bn in 1999.

"I think they're intervening like crazy right now," said the Tokyo head of one foreign bank's currency operations. Intervention operations had continued throughout the holiday period in foreign markets, he said. "I don't think the finance ministry wants to let the yen go above Y105 to the dollar."

More: http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1073280785097&p=1012571727102

Dollar might weaken further against euro

The dollar could weaken further this year following its 17 per cent decline against the euro last year and in spite of expectations of strong US growth, currency strategists said on Sunday.

SNIP

Treasury bond yields are consequently under pressure, potentially weakening foreign appetite for US debt and causing further difficulties for the US in funding the current account deficit, which is already at a record level.

Economists at HSBC believe there will be no rise in US interest rates this year, and forecast that the euro will have risen to $1.35 by mid-year.

"The US is issuing paper promises in the form of Treasuries in return for real goods and services. This is eventually unsustainable and this could be the year when the problem comes fully home to roost," comments David Bloom, currency strategist at the bank.

More: http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1071251894288&p=1012571727102

VERY interesting times, indeed.

On edit - LBN thread: http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=102&topic_id=300248

[demnan]

3. comments by that David Bloom guy

are really omminous.

[bemildred]

4. Playing chicken. nt