Dollar Gains Strength Off China Requirements

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With China being the secret power, any financial decisions they make effect the world financial markets.  Once you understand this you will be able to get in on trades when the big dogs do and way before other individual investors.

Dollar gains as China requires banks to hold more cash

The dollar rose versus most major rivals Tuesday, extending gains versus the Australian dollar and other high-yielding currencies after the People’s Bank of China said it would require banks to hold more cash in reserve as it attempts to restrain credit growth.

The PBOC, in a statement on its Web site, said it had raised its yuan-reserve-requirement ratio by 50 basis points, or half a percentage point, effective Jan. 18. The existing ratio stands at 15.5% for big banks and 13.5% for smaller ones, according to Bloomberg.

Earlier, the PBOC sold one-year bills at 1.8434%, a rise of 8 basis points from last week and the first rise since Aug. 11. Last week, the central bank lifted the yield on its three-month bills by 4 basis points. Economists said that move had limited market implications.

The Australian dollar slumped after the announcement to change hands at 92.47 U.S. cents in recent action, a fall of 0.7% on the day. The Aussie fell 1.2% versus the Japanese currency to change hands at 84.6107 yen.

Expectations had grown following strong Chinese export and import data over the weekend that the central bank would begin to move to rein in credit growth in an effort to keep the economy from overheating, said Mike Malpede, chief market analyst at Easy-Forex in Chicago.    –more

Related China articles

• China raises reserve ratio by 0.5 percent (seattletimes.nwsource.com)
• Asian Stocks Drop on Worries Over Chinese Monetary Policy (nytimes.com)