Chinese updated policies: Pushing pressure on Exports

Wednesday, January 13, 2010


As the US Commerce Department issued a report that showed the Trade Deficit had widened much more than expected, the US Dollar was able to still hold off another selloff due to concerns brought about by a Chinese mandate that will in effect, make it harder for companies to do business with the Asian giant.

The Chinese government said that it would raise the reserve requirements by half of a percentage point, effectively making it more expensive for countries to export goods to China.

The move comes after many countries had pleaded with China to enact a responsible monetary policy – effectively allowing the Renminbi to be let loose as opposed to tightly control.

As a result of the move, most of commodity linked countries such as Canada and Australia, which rely heavily on Chinese consumption, fell.

The USD also benefitted from a sharp fall in Gold prices after China's announcement. But the data pertinent to the Dollar, the Trade Deficit numbers rose more than 3 Billion Dollars than estimates said it would, trashing 36 Billion Dollars after oil and commodity prices rose considerably.

The Dollar still gained though and Forex traders are awaiting the other supporting data such as consumer spending and confidence before making a final decision on what to do with the Dollar.

At 4AM GMT, the US Dollar was trading down .03% to the Euro to 1.4487, up .14% against the Japanese Yen to 91.12, down /15% to the Pound Sterling to 1.6186, down .1% versus the Canadian Dollar to 1.0378, down .03% to the Australian Dollar to .9236 and up .12% to the Swiss Franc to 1.0177.



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