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Asian−Pacific Nations Pledge to Maintain Stimulus

James Hyerczyk from ForexHound.com at 11/16/09


The U.S. Dollar is trading mostly weaker this morning following the decision by Asian-Pacific nations to maintain stimulus until the global economy shows “durable” growth.  The pledge to continue the commitment toward liquidity has reduced the attraction of holding the U.S. Dollar.


The Asian-Pacific Economic Cooperation members failed to address currency issues but did say that it wants to see nations “refrain from raising new barriers” to investment and trade activity.


While the Asian-Pacific nations were holding back their comments regarding currency valuations, China’s chief banking regulator was criticizing the United States’ loose monetary policy.  He said it was encouraging speculation in the Dollar.


The chairman of the China Banking Regulatory Commission said, “The continuous depreciation in the Dollar, and the U.S. government’s indication that, in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive Dollar arbitrage speculation.”


He also added that the U.S. interest rate policy has “ seriously affected global asset prices, fueled speculation in stock and property markets, and created new, real and insurmountable risks to the recovery of the global economy, especially emerging - market economies.”


The combination of the Asian-Pacific nations and Chinese regulatory banker comments is leading to more weakness in the U.S. Dollar this morning.


Traders are awaiting U.S. retail and business inventory figures this morning.  Overnight Japan reported a better-than expected GDP number.  This was another sign the economy was pulling out of the recession.  The report showed the economy expanded at a 4.8 percent annual pace.  This number was well above the 2.9 median guesses and showed the economy was growing at its fastest pace in 2 years.


The EUR USD is trading better on the heels of last Friday’s report showing that the Euro Zone was emerging from its recession.  Although the economy is improving, don’t expect the European Central bank to raise interest rates soon.  Its first step will most likely be gradually ending its stimulus packages.

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