2011: China and Other Asian Central Banks Light The Way

2011: China and Other Asian Central Banks Light The Way

The most important news for currency and commodity markets in 2010 was, in our view, the June move by China to open its currency to a flexible regime. Over the course of the year, we have discussed the ripple effect this has had on currency markets, especially concerning its implication on the USD/Index. We believe that “flexibility” in China means it is actively reallocating reserves.  By allowing its currency to strengthen and reallocating reserves, China must buy fewer U.S. dollars in the market, while selling currently owned U.S. dollars and purchasing non-U.S. dollar assets. 
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