Chile cuts interest rate to record low; Peso falls

Chile’s central bank lowered interest rates to record lows today. This
is the country’s latest effort to stimulate a slowing economy which is
heavily dependent on global prices and demand for its commodity
exports.

Not good news for a country like Chile. Copper demand (its primary
commodity export) looks set to slow in the upcoming months as demand
from China wanes, which until recently had been stockpiling resources.
This seems to be over and now one of Chile’s primary buyers is
sitting on mountains of unused copper. Once again, not good for
Chile, Peru or any other countries that sell their metals to China.

Bloomberg reports:

The currency slipped 1.1 percent to 552.65 per U.S. dollar at 9:15
a.m. New York time, from 546.85 yesterday.

The central bank said in May and June that traders were overestimating
the future path of interest rates. Now it will offer banks six-month
loans that match the new overnight rate of 0.5 percent and cut sales
of its own debt to push yields lower.

“It is necessary to increase monetary stimulus,” the bank said in
yesterday’s statement. “The policy rate will be held at this minimum
level for a prolonged period of time.”

To access the entire article from Bloomberg please visit:
http://www.bloomberg.com/apps/news?pid=20601086&sid=alxLFHEdnThQ

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Benito
International Trade Consultant
Mir Global Marketing LLC
http://www.mirglobalmarketing.com
http://www.chinasouthamerica.com

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China’s currency reserves may top $2 trillion

Now where is China going to put $2 trillion USD? Well according to
this Bloomberg article (see excerpt and a link to the complete article
below), China still plans to purchase US treasuries. However, if
China’s recent foreign policy and international investments tell the
world anything, it is that the total dominance of the US dollar as the
world’s currency is slowly coming to an end. This won’t happen over
night, and the US dollar will probably remain a big player for some
time, but eventually China wants to find new places to park its money.

Here’s a small except. See link below for the complete article from Bloomberg.

China’s foreign-exchange reserves probably topped $2 trillion for the
first time, drawing attention to the difficulty the government faces
in finding places to invest the world’s largest holdings.

The reserves climbed $67.8 billion to $2.022 trillion as of June 30
from three months earlier, according to the median estimate of six
economists surveyed by Bloomberg News. That would compare with a $7.7
billion gain in the previous quarter. The central bank may release the
number today or next week, based on the timing of previous
announcements.

Central bank Governor Zhou Xiaochuan ruled out any sudden change in
the management of the reserves last month after proposing that
governments investigate setting up a supranational currency. Premier
Wen Jiabao is concerned that China’s $763.5 billion of Treasury
holdings may fall in value as the U.S. sells record amounts of debt to
fund stimulus spending.

“There’s no obvious alternative for China to U.S. Treasury bills,”
said Stephen Green, head of China research at Standard Chartered Plc
in Shanghai. “The alternatives are limited for that much money.”

China’s reserves more than doubled in two and a half years as the
trade surplus pumped cash into the economy, fueling claims that the
nation’s currency is kept artificially low to help exporters. The
International Monetary Fund may describe the yuan as “substantially
undervalued” in a pending report, according to a person who has seen
the draft.

Bloomberg article:
http://www.bloomberg.com/apps/news?pid=20601080&sid=acAzOqr9lvKA

—
Sent from my mobile device

Benito
International Trade Consultant
Mir Global Marketing LLC
http://www.mirglobalmarketing.com
http://www.chinasouthamerica.com

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