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November 8, 2007
China Remarks Drive Dollar Lower
By CARTER DOUGHERTY
Currency traders gave the dollar a thorough pounding today after a Chinese official suggested that the country could begin to diversify its huge foreign-exchange reserves.
The euro broke the $1.47 barrier before retreating a little and the pound climbed above $2.10, a value it had not reached 26 years ago. Other currencies also posted gains against the dollar.
Remarks by Cheng Siwei, vice chairman of the National People’s Congress in China — a colossal dollar investor by virtue of its $1.43 trillion in currency reserves, most of which are presumed to be denominated in dollars — helped drive the dollar lower.
“In terms of the structure of our foreign exchange reserves, we should take advantage of the appreciation of strong currencies to offset the depreciation of weak currencies,” Mr. Cheng said, according to Reuters.
It will come as a shock to the average American, but the countries of the world who are not us are tired of us and our profligate ways. The Chinese, in particular, are weary of purchasing federal ten-year securities and finding themselves repaid with a dollar worth half what it was when loaned.
Hard to blame them.
China is investing heavily in our stock markets and corporate entities, but they are (for the most part) done with shoring up a loser--and our dollar is an unprecedented loser. We must cross our fingers that the oil-producing nations don't abandon the dollar as well and sell their product for Euros instead.
The American economy, battered by deficit spending at a rate never seen before in the history of the world, consistently degrading balances of trade, the smallest savings rate in the industrialized world and a veritable domino cave-in of corporate abuses, is not helped by our increasingly belligerent foreign policy.
Sarkozy is the darling of Congress and Merkel will dine at the ranch, but all is not well on the Western Front.