You likely will be seeing a lot more about this subject in coming days and weeks, because it indicates that a bottom for the dollar could be much farther off then previously thought.
The subject is current account surpluses-who has them and what could happen as their use becomes more influencial in global financial and FX markets.
According to the latest data from the IMF, global FX reserves increased by 5.2% in the first quarter of 2007 to $5.3T, with the vast majority of these FX reserves being accumulated in dollars. China is accumulating $44B/month, more then twice the $20B/month growth seen in 2006. India’s FX reserves are increasing by around $5.1B/month (compared to $3.33B/month last year) while Russia’s are growing by $14.7B/month (compared to $10.7B last year).
Central Banks keep a specific balance in their portfolio of reserves so if one currency is accumulationg faster, the portfolio has to be "re-balanced". Not all CB's report their balance to the IMF, but making an estimation based on those that do indicates that in order for China to keep its portfolio in balance, they need to sell around $690M/trading day into other currencies such as the GBP, EUR etc.
I'll be posting more about this subject tomorrow morning, NY time. For now-just know that there is alot of dollar selling that needs to go on in order for Central Banks with current account surpluses to maintain their "balance".
The subject is current account surpluses-who has them and what could happen as their use becomes more influencial in global financial and FX markets.
According to the latest data from the IMF, global FX reserves increased by 5.2% in the first quarter of 2007 to $5.3T, with the vast majority of these FX reserves being accumulated in dollars. China is accumulating $44B/month, more then twice the $20B/month growth seen in 2006. India’s FX reserves are increasing by around $5.1B/month (compared to $3.33B/month last year) while Russia’s are growing by $14.7B/month (compared to $10.7B last year).
Central Banks keep a specific balance in their portfolio of reserves so if one currency is accumulationg faster, the portfolio has to be "re-balanced". Not all CB's report their balance to the IMF, but making an estimation based on those that do indicates that in order for China to keep its portfolio in balance, they need to sell around $690M/trading day into other currencies such as the GBP, EUR etc.
I'll be posting more about this subject tomorrow morning, NY time. For now-just know that there is alot of dollar selling that needs to go on in order for Central Banks with current account surpluses to maintain their "balance".