China Reserves and Commodity Currencies
After China announced it would be tightening up its reserve requirements for its banks, commodity currencies across the globe fell in value in response to the possibility China demand could slow down, which would hinder what small hope of a minimal economic recovery there is at this time.
The central bank of China said in a statement yesterday that the required reserve ratio would be increased by half a percentage point starting next weak, an obvious action showing China is going to tighten up their monetary policy.
Nations with strong links between their currency and commodities had their currencies hit lows against the U.S. dollar as a consequence of the announcement, which could dramatically influence their value for the year. The Australian, New Zealand and Canadian dollars were especially impacted by the news.
What's interesting about all this, is China seemed to be surging forward on increasing its commodity stocks for 2010, as December imports had increased by 56 percent for 2009, and commodity exports in December grew by a solid 17.7 percent, seeming to imply they were importing commodities based on consumer demand for products.
Even so, in general, commodities are expected to do well this year, but it seems those estimations have been based upon the idea we are actually in a real recovery something in my thoughts is far from being proven as a reality.
China Reserves and Commodity Currencies
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