Uighurs Save the Day!!

Wednesday, July 8, 2009

Who would have thought that a group of Uighurs, the ethnic Islamic population in western China, could be the saving grace for the US Dollar? Not me, but this morning I awoke to surprising news that might, just might, spare the dollar of some of its harshest criticism at this weeks G8 Summit in Italy.

The news is out that Chinese President, Hu Jintao, has left the earthquake ravaged city of L’Aquila in Italy, where the G8 is being held, to return to China where social unrest is escalating in the Western City of Urumqi where the Uighurs call home.

I am not going to waste this post speaking of the background of the unrest or taking a side, I am a capitalist that believes in free markets and people, and this should say it all. However, I will focus my efforts here on talking about how these Chinese citizens, who are literally fighting for their rights, could have unwittingly helped the Greenback.

For the past several months, China has been playing a game of cat and mouse with the US with respect to the Dollars standing as the global choice for currency reserves. They would make a comment that hinted towards their discontent at how the Dollar is not being managed well only to half-heartedly reaffirm their “trust” and “faith” in the strength of the Dollar. They would hypothesize on the introduction of a new global reserve run by the International Monetary Fund one day, and talk of the Dollar’s necessity the next.

And most recently, they, specifically Mr. Jintao, called on the G8 to openly debate the implementation of a new reserve structure that would see the Dollar put on the same level as all other major currencies.

Mr. Jintao’s departure from the Summit before it even began is not necessarily a good sign, however it might just be based on the order of things in China. While there is still a nicely sized delegation from China, including the Prime Minister, it is seen as the President’s role in China to cover this sort of financial issue.

The Prime Minister, Wen Jiaboa, is more likely to be the point man on the global warming and subsequent emission regulation debates than on the status of the currencies. The Finance Minister might bring it up, however it will not be strongly debated from his side without Mr. Jintao present. China is a society that operates with respect for authority and deference to that authority, and this cause is widely seen as that of the President’s.

What does this mean for Forex traders today and tomorrow? Perhaps nothing, however I believe there will be strength in the Dollar as a result.

The past two trading sessions have seen a return to risk aversion and safe-haven currencies, and for the first time in a long while, the Japanese Yen has beaten out the Dollar for this attention.

The world is still a messed up place economically (and as we see from Iran and now China, socially as well), and safe-haven bids will figure prominently into the trading in the coming sessions.

But, it is my standing that the Dollar will recapture the interest of Forex online trader’s as its harshest critic, and largest single investor, will be muted this week. And the irony of it all is that all of this would not have been possible without the help of several thousand poor and underrepresented people in some small, obscure and economically irrelevant part of China. It’s a strange, strange world.


About This Blog

Get the latest Forex online news and updates right here at one place.