US President Barack Obama has arrived in Beijing, China after visiting Shanghai where he met with students and called for greater Internet freedom for the Chinese. Obama said in a town-hall style meeting with students that he believes the free flow of information strengthens societies. Obama will try to calm Chinese fears about Washington’s response to the global economic crisis. China is the world’s biggest owner of US Treasury bonds. Chinese leaders have said they fear that the US will try to devalue its way out of the massive obligations it has assumed to save the banking industry and to stimulate a faltering economy.
The government’s head of banking regulation, Liu Mingkang, Monday 16 November criticized the US Federal Reserve’s loose monetary policy, saying it is having a “massive impact on global asset prices.” He said a weak dollar and low interest rates were endangering the economic recovery, especially in emerging econmies.
The US continues to call on China to revalue its currency, which it says is making Chinese exports cheaper and undermining other countries’ efforts to stimulate their economies. Economist, Financial Times, Reuters
The price of gold, which has risen 16 percent in the past year, reached a new record high of $1,048.40 ($1,054 an ounce for immediate delivery) 7 October as investors seek a hedge against the dollar. The Independent in the UK stirred fears earlier in the week with an article saying that oil-rich Arab nations could be moving out of dollars and into gold, although other market watchers disagree and the story was later discredited by several other media. A Credit Suisse gold market analyst told the Daily Mail that gold will continue to climb while investors move out of dollars. The Financial Times Thursday 8 October says “The depreciation of the US dollar is sparking growing jitters among critics of the Obama administration over the potential loss of America’s reserve currency status.”
The dollar Thursday morning was trading at $1.61/£, $.068/€ and $1/CHF1.03.
Links to other sites: BBC, Bloomberg, bullionvault, CS Monitor, Financial Times, goldprice.org, Guardian, UK, Independent, UK, Wall Street Journal/Dow Jones wire
Chinese official Guo Shuqing, meeting with Americans this week in Beijing to discuss the economy, says his country will continue to back the US dollar as the global reserve currency. The bulk of Chinese foreign investment is in dollars; the Financial Times notes that only 6 percent is in direct investment. The Chinese have been calling on the US to develop a more conservative fiscal policy to avoid undermining the dollar.
The US Federal Reserve Tuesday cut interest rates from 1% to between 0 and 0.25%, a record low. The Financial Times said it had “moved deeper into uncharted waters.” Bloomberg focused on the Fed buying debt as its next step. The Wall Street Journal says the rate cut “put an exclamation point on a day-long stock rally Tuesday.” The dollar slumped against other currencies.
Stock markets throughout Asia fell Thursday amid growing fears over exports and recession, while the dollar rose to a two-year high against the euro. Reuters
