Sunday, November 1, 2015
The Beginning of the Death of the US Dollar?
China's currency, the renminbi, posted its biggest one-day gain ever on Friday, as traders said China’s central bank appeared to have intervened.
The renminbi closed 0.62 per cent stronger in the onshore market, its best day since China’s landmark de-pegging of its currency in 2005. The currency is now at Rmb6.3175 a dollar, its strongest level since the People’s Bank of China surprised global markets on August 11 by letting the renminbi depreciate. The renminbi is still 1.8 per cent weaker than at the start of 2015.
In the offshore CNH market, the renminbi was trading 0.27 per cent stronger at Rmb6.3325 late on Friday.
The intervention quite likely included PBOC sales of US Treasury securities. The sales raise dollars which then can be used to prop up the renminbi.
To date, Chinese sales of Treasury securities have been absorbed fairly well by the markets, but there is likely a tipping point where sales result in major downward price pressure on the bills and notes---and the dollar itself.
at 12:53:00 PM