November 16, 2007 | Filed Under News
Yesterday, the Internet was overflowing with information on the fate of U.S. currency. For the first time in SIXTY TWO years, the American dollar’s dominance in the world market is in jeopardy. Myriad nations are ready to get rid of the failing dollar in order to preserve their own security. The American dollar can barely compete with Canadian currency at this point, and that’s a real shame.
The latest news on the American dollar:
BEIJING, Nov 16 (Reuters) – Chinese lunchtime television on Friday gave ordinary people a basic tip on how to play the currency markets: sell the dollar!
A state news programme, quoting unnamed “wealth management experts”, told residents with dollar accounts on the mainland to convert their holdings into yuan or a range of other foreign currencies, including the pound and the euro.
The prospect of ordinary Chinese ditching the dollar should be less alarming than reports that have roiled global markets of Beijing diversifying its official foreign exchange reserves.
Whereas China’s official reserves of more than $1.4 trillion are the world’s biggest, private foreign currency deposits in China are a fraction that size: $162.1 billion at the end of October, according to People’s Bank of China. The central bank did not give a currency breakdown of these deposits.
The state news programme, which did not quote any government official, said people were getting squeezed because the pace of yuan appreciation against the dollar was greater than the interest rate earned domestically on dollar accounts.
Analysts expect the yuan to rise anywhere from 5 to 7 percent annually against the dollar, while domestic dollar accounts earn depositors just 3 percent a year.
The programme proposed three solutions.
“Selling dollar for yuan as soon as possible may be a safe approach,” the news programme said, adding the yuan could then be used to invest in domestic mutual funds.
“Secondly, you can change the dollar into strengthening currencies,” it continued. “Currently, the U.S. dollar is falling against the euro, the British pound, the Australian dollar and the Canadian dollar, and you can change the dollar into these currencies for deposits.”
The third recommended strategy was to invest the dollars abroad, in search of higher yields, by buying into Qualified Domestic Institutional Investor (QDII) products offered by Chinese banks and fund managers. (Reporting by Zhou Xin, Editing by Simon Rabinovitch)
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