Independent UK: The Gulf Arabs are planning secretly with China, Russia, Japan and France to end the age of USD denominated oil price. Instead the new oil price would be measured in a basket of currencies including CNY, JPY, Euro, Gold and Gulf currency (including Saudi, UAE, Kuwait and Qatar). The provisional date for the change to take place is 2018. Such a change would mark the funeral of USD in the world’s most important commodity and its role in terms of international trading. Also it will mark the beginning of a multi-polar systems in world trade and currency. Would this scenario become true? What would be the consequence? A new World order?

独立报：海湾四国和中国，法国，俄罗斯和日本最近密谋将石油定价系统从美元改为一揽子货币。一揽子货币包括欧元，人民币，日元，和海湾地区当地货币。同时海湾地区当地货币将和美元脱钩。计划初定时间表2018年之前完成。一旦该计划实施美元将受到重大打击。

China Daily Beijing: According to Mr. Yi Gang, the central Bank official of China, China will stick to her RMB policy irregardless of the pressure from other countries or organizations. The suspiciously undervalued RMB has been a focus of criticism from main trading partners such as USA. However, since the financial crisis in 2008, the criticism has been silenced as the stability of RMB plays an important role in stabilizing the world economic order. Since the economy seems to be on the way of recovery, however, the undervaluation of RMB starts to attract attention again. My personal take is that China didn’t compromise much when the pressure on RMB was much higher two years ago, so there is no reason to expect China to do anything more than expected this time. Plus, the recovery is not that convincing yet so I would expect RMB to be continuously virtually pegged to USD for the foreseeable future.

中国日报报道，近日关于人民币的讨论重新浮出水面。人民币汇率过低一直是各国批评的焦点之一。由于金融危机这些批评声渐渐消失。但是最近经济似乎有复苏，对人民币的压力似乎又有回升。

Economist: During the global rebalance of economy dynamics, the exchange rate of CNY has played an important role in the process. There is practical incentive from the Chinese government not to revalue the yuan as her export sector has been hit hard by the financial crisis, and if RMB is revalued upwards, the consequence could be disastrous. However, on the other hand, there are good reasons to revalue the Yuan as well. For example a revalued yuan will lower the cost of Chinese imports on the raw materials, and potentail curb the inflationary pressure on its domestic equity and property market. In addition, if China wants to make Yuan more internationally accepted, it is inevitable that China makes Yuan more freely traded and therefore revalued.

经济学家撰文指出,中国政府目前还不想让人民币升值过快，其主要考虑是要保护出口行业。但是从另外一方面看，人民币升值也有助于控制原材料进口成本和国内的通胀压力。同时，如果中国政府想推进人民币国际化，那么自由兑换和升值几乎是不可避免的。

Beijing Review: An important lesson for China from the current financial crisis is the vulnerability of its USD reserve and the caveat of relying on USD as an international trade currency. The professor from Peking University advocates the government to take material steps to enhance the internationalization of RMB and also find a way to reduce dependence on USD.

北京日报：由于金融危机的冲击，很多中国学术界知识分子认识到美元的脆弱性以及对于美元过分依赖造成的严重后果。北京大学教授表达其观点，指出中国政府应该加速人民币国际化过程和去美元划的努力。

According to the head of Foreign Reserve Management Bureau, Mr. Liu Guangxi, it is unlikely for RMB to be freely traded in the near future unless a complete internal control system is established. According to Mr. Liu, the trend of RMB appreciation and internationalization is very clear. However, USD will continue to be the dominant international reserve for at least the next decade if not longer.

在美元汇率持续下滑的情况下，市场对人民币的升值预期有所升温。国家外汇管理局资本项目管理司司长刘光溪近日坦言，当前人民币存在升值压力，中国仍是资本净流入国；因此，这是中国进一步推进资本帐户自由化的好时机。但他同时强调，除非能保证建立起全面的监控和风险预警系统，否则中国不能完全放开资本管制。

刘光溪表示，要改革国际货币体系，只以一种主权货币为基础是无法持续的。中国当局正在鼓励海外直接投资，人民币将逐渐被承认为全球性货币。他续称，人民币将在全世界愈来愈普遍受到承认，更多地用于贸易及资本交易，这是无法逆转的。刘光溪亦承认，当前人民币还存在升值压力，中国还是资本净流入国。

对此，中国人民大学金融与证券研究所所长吴晓求表示，在目前汇率体制下，人民币缓慢升值将是个趋势。“任何一个货币国际化，都是一个升值过程，不可能是贬值过程，因贬值就没人要，就不可能国际化。”对于未来国际货币体系变化，吴晓求相信，未来十年美元的地位不会动摇，仍然是世界上最重要的货币。美元与人民币未来将相互共存，共同发展，共同维护全球货币体系的稳定。

事实上，基于人民币的升值预期升温，市场也开始憧憬将有更多热钱涌入中国套利。广东省社科院产业经济研究所副所长黎友焕亦指出，在近日境内外远期市场一年期美元兑人民币报价出现约千点价差的时候，已发现当时的热钱流动开始变得十分活跃。不过，由于学界对于未来人民币升值与否难以确认，因此目前判断热钱会否急速流入仍为时尚早。但人民币升值无疑是一个影响热钱流动的重要因素。 Continue (继续)

(Sohu) The dollar is likely to remain stable over the next twelve months. It could stage a cyclical bull market in 2011 as the Fed raises interest rate to 5% and the lower US asset prices attract foreign capital. The cyclical bull market may last two to three years. The longer term prospect for the dollar depends on the US’s current healthcare reform. Its direction doesn’t appear promising. The US Congress may pass part of the Obama agenda that increases spending and not the part that cuts cost. The long term scenario for the dollar remains bearish.

I have changed my view on the dollar in two aspects. First, at the beginning of the year I thought that the dollar would make a new low on surging US fiscal deficit. The previous low was in April 2008 when the dollar index (‘DXY’) hit 71, 42% below its high in 2002. After Lehman Brothers went burst, the index rebounded by 20% quickly and peaked at 89 in early March, as risk appetite collapsed and the safe haven trade favored the dollar. When the risk appetite returned, it declined by 10% and has been range bound for three months. This has happened despite the overwhelming bearish sentiment towards the dollar, which triggered massive capital flow out of the dollar-based assets into commodities and emerging market stocks. What’s supporting the dollar is the surging US household and corporate savings that have more than offset the increase in the US’s fiscal deficit. As the US household savings continue to surge, the dollar is likely to remain stable. Continue (继续)

(Prudent Squirrel) As gold tries to break and hold $1000 it brings up the larger question of how long the USD has to last. At the very least, after the markets digest the debate over deflation which is USD bullish, the question becomes: how long can the USD hold together before it falls in value drastically.

Big drumbeat out there

I am sure that you know about China vigorously complaining about the abuse of the USD, most loudly complaining about the Fed’s quantitative easing (buying any and all bad assets from banks and putting them on their balance sheet – called monetization, which is printing the money to replace the losses). The Fed had to back off this Summer from that plan and significantly reduce those policies, said in large part due to China’s vigorous complaints.

No, we cannot Continue (继续)

(WSJ) Beijing’s announcement earlier this week that it will sell yuan-denominated government bonds in Hong Kong has caught a lot of attention. The Ministry of Finance bills it as a measure to “promote the yuan in neighboring countries and improve the yuan’s international status.” The move comes in the context of Beijing’s larger goal of transforming the yuan into a global currency. While on its own this is a relative baby step, it is more significant than at first appears.

The bond issue, set for September 28, will consist of six billion yuan ($879 million) in government debt sold to retail and institutional investors in Hong Kong. This is a drop in the bucket compared to Beijing’s overall outstanding government debt of 6.3 trillion yuan and especially relative to a world-wide United States Treasury market of nearly $7.5 trillion. But it’s a strong signal of Beijing’s future plans to internationalize the yuan. Continue (继续)

(Telegraph) Cheng Siwei, former vice-chairman of the Standing Committee and now head of China’s green energy drive, said Beijing was dismayed by the Fed’s recourse to “credit easing”.

“We hope there will be a change in monetary policy as soon as they have positive growth again,” he said at the Ambrosetti Workshop, a policy gathering on Lake Como.

“If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,” he said.

China’s reserves are more than – $2 trillion, the world’s largest.

“Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets,” he added. Continue (继续)

(FT) The Chinese and US monetary authorities provide the best example of the “Stockholm syndrome” applied to international financial affairs. Cloying dependence between hostages and hostage-takers in drawn-out abductions describes the symbiotic bonds between the world’s biggest debtor, the US Treasury, and the largest creditor, the People’s Bank of China. Chinese leaders frequently emphasise America’s responsibilities for the stability of the dollar as the premier reserve currency. The Chinese central bank, the guardian of the proceeds from Beijing’s massive current account surpluses, warns obliquely that turning its back on the greenback would risk a monetary catastrophe. It is time, though, for a more balanced debate. To enhance its credibility, Beijing must put its own house in order. In the interests of a more stable monetary system, China needs to open its capital markets and allow broader international access to the renminbi. Continue (继续)

(WSJ) China will buy bonds from the International Monetary Fund using the yuan, extending current practices where member nations make most of their contributions to the IMF in local currencies.

The IMF said Wednesday China has agreed to purchase approximately $50 billion worth of bonds denominated in Special Drawing Rights, a fundraising effort that is part of a broader push to bolster the IMF’s resources. Brazil and Russia have also said they each intend to buy as much as $10 billion of bonds from the IMF, which hasn’t issued debt before.

Many analysts had expected China would sell some of its more than US$2 trillion in foreign-exchange reserves to buy the IMF bonds, in order to reduce its exposure to the U.S. dollar. But according to the agreement posted on the IMF Web site, China will use its own currency. Continue (继续)

澳元将遭遇中国方面的阻力。不过，从表面上看，澳元应会大幅走高。因为与十大工业国(G10)中的其他国家不同，澳大利亚经济几乎没有受到全球经济衰退的冲击。而且澳大利亚央行目前也打算最早于10月份加息，从而撤出其全球信贷危机应对策略。

近日澳大利亚央行宣布将基准利率维持在49年低点3.0%不变，但同时发布声明表达了对国内通货膨胀率居高不下的担忧。鉴于澳大利亚央行着手近期加息，而其他国家很可能要等到2010年才会再度加息，澳元的投资吸引力相比其他主要货币要高得多，并因此得以延续涨势。不过，若要将澳大利亚与中国的密切关系考虑在内，澳元的前景恐怕就不会如此光明了。

澳大利亚经济发展主要依赖于向商品需求大国中国出口大宗商品。然而，眼下的问题是中国的商品需求很可能会出现下滑。近几周来，中国政府几乎每周都会进行政策调整，这说明中国政府正急于遏制上半年其特有的经济强劲增长势头。单就上周而言，中国政府建议对国内钢铁和水泥生产采取限制措施，以防产能过剩问题进一步恶化；与此同时，中国银行表示，下半年的放贷规模将远远小于上半年。受人们对中国经济增长放缓的预期影响，上证综合指数8月份累计下挫逾15%。 Continue (继续)

(Shanghai Daily) SHANGHAI is poised to allow another 200 companies to take part in the cross-border yuan settlement trial.

Since July 6, the city has approved 92 companies to join the trial and more of them will be allowed to participate in the trial, Fang Xinghai, director of the Shanghai Financial Services Office, said yesterday.

He declined to give a time frame for the firms to join the trial, as approval from top regulators is also required.

In April, the Chinese government allowed five mainland cities to start the trial for settling cross-border trade in yuan with businesses in Hong Kong, Macau and the 10-member Association of Southeast Asian Nations. Continue (继续)

美元经历了因美国强盛代替英镑的霸主地位走上历史舞台，但也因为军事以及经济的扩张导致美元霸权地位由盛转衰。二次世界大战以后，在战争中发了财的美国，以经济强势挤走了英国，用美元替代英镑取得国际主导货币的地位，至今60多年。

从上世纪60年代开始，美元连续暴发七次危机。至1971年8月，时任美国总统尼克松为维护美国利益，突然宣告“布雷顿森林体系”终结。美国背信弃义，切断了美元与黄金的联系，黄金作为最诚实的“货币”被美国逐出了世界金融舞台。美元由此进入霸权时代！历史上对纸币有约束力的只有黄金，黄金失去约束力，纸币就是“废纸”一张。既然是“废纸”便可为我所需，为我所用，甚至可以无节制的乱发，通货膨胀由此开始。 Continue (继续)

(Bloomberg) — Global fund managers are betting China will let the yuan strengthen for the first time in more than a year to keep inflation at bay following a flood of foreign capital and record lending.

Schroder Investment Management Ltd., Western Asset Management Co. and Martin Currie Investment Management Ltd. said they bought contracts in July that pay off if the currency advances more than set amounts. On average, last month’s non- deliverable 12-month forwards will make money next July if the yuan rises more than 0.87 percent, or sooner if that expectation increases. Schroder and Western predict the contracts will reflect expected gains of 5 percent or more by Dec. 31. Continue (继续)