Global Currents

In brief:

  • Riccardo Barbieri argues that China’s swelling currency reserves may relegate the dollar and euro to trading ranges, “effectively ending their free float in the market.”
  • Overnight in Tokyo, the dollar fell to “a fresh post-intervention low against the yen” of 83.23, despite the Sept. 15 dollar-buying spree by the Bank of Japan. Traders are on edge about another intervention.
  • The US House of Representatives voted to allow tariffs on Chinese goods. Andrew Peaple thinks the move “has much to do with political posturing ahead of US mid-term elections,” but notes that “strong voices in Beijing” don’t want to look weaker than US politicians. China already cried protectionism.
  • The Financial Times reported that the European Central Bank has been steadily weaning banks off of supportive liquidity. That plus improving sentiment suggests that the recovery in Europe “remains on track.”
  • Morgan Stanley analysts found that in Asia ex-Japan and ex-India, the “food inflation rate increased to 6.5% in August from 5.3% in June and 3.3% in Jan-10.” They worry that “any quick acceleration in oil prices could pose a significant risk in light of already rising food prices.”

In a little more detail:

  • Japanese companies seek new rare earth metals suppliers. A recent diplomatic spat between Asia’s two largest economies led to “a de facto ban” on shipments of rare earth metals from China to Japan. It’s created opportunities for non-Chinese suppliers because Toyota Motor Corp (TM) and other “Japanese customers of rare earth metals are looking elsewhere.” Top of the potential supplier list: Australia’s Lynas Corp (LYC.AX) with deposits in Malaysia. Rare earth minerals are “vital for Japan’s key auto and electronics industries.”
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