Gold - The
Weekly Global Perspective
At last, a Yuan Revaluation!
Julian D.W. Phillips
Jul 26, 2005
Excepts from the "Global
Watch - The Gold Forecaster."
China has cut the link to the
U.S. $ of Yuan 8.277, switching the link to a basket of foreign
currencies instead at Yuan 8.11 a 2.02% revaluation. This is
a major step for the Chinese, always cautious, taking small steps
to gauge the unseen impact before taking larger steps.
 From now on
the Yuan will be allowed to trade in a tight 0.3% band against
a basket of foreign currencies, the government said. It has not
disclosed which currencies these are, but will likely be the
currencies of the most important Trade partners of China.
It said the central bank would
announce the Yuan's closing price each day, and that rate would
be the midpoint of the next day's trading band. Chinese officials
said any abrupt change in its currency system would cause turmoil,
hurting its fragile banks and financial industries.
[Malaysia simultaneously announced
it was dropping its own policy tying its currency, the ringgit,
to the U.S. dollar and would adopt a similar arrangement.]
The market jumped almost in
fright when the announcement was made, but needs time to digest
the implications of the delicate extent of the revaluation. To
us it is a 'giant' leap in the monetary system because the implication
is that instead of asking for $ prices or giving $ prices, they
will accept prices in the currencies in the basket. This is critical,
as the use of the $, with regard to both imports and exports
will diminish as the basket currencies take its place to the
relevan extent! If the U.S. $ is reduced from its current level
of 80+% of global trade to the extent implied by the basket,
the $ should decline and foreign exchange markets become increasingly
more volatile.
Asian countries that have a
large and growing dependence on Chinese trade will do as China
does, so magnifying Chinese foreign exchange activities. Include
in these Taiwan, Japan, Korea, et al. As Malaysia has joined
them in this policy, so we now expect to see others do so in
the future.
We will provide the full story
as we see it to new [and old] Subscribers of the "Global
Watch - The Gold Forecaster."
In summary, the $ as
the one global reserve currency will now be joined by others,
but in such a way as to change the stability and volatility and
future of the global Foreign Exchanges permanently! It
will be vital to understand not only what has happened but why
and with what purpose it has happened!
The Oil Price steady
at the starting post
The Unocal Saga
Is this about a financial transaction
or is it political manoeuvrings? The latter it seems,
but in the guise of a financial transaction, or did we not see
the value in a $63 Cash and Stock offer from Chevron against
a $67 Cash offer from CNOOC?
The Chinese will, we expect, raise their offer until it is a
full-scale political showdown. They
have to! If the Japanese felt the pressure of no
resources of their own and went to war over it, the Chinese must
be aware of the high stakes in this story. It is a useful banner
for the future. The way this deal goes will confirm if Politics
overrides Capitalism and its Cash.
Should the U.S. retain control over Asian energy reserves [we
are talking the heart of the deal being Unocal's oil and gas
fields in Asia, mainly in Indonesia, Thailand, Myanmar and Bangladesh,
as well as a scattering of assets in North America, which hold
a total of 1.7 billion barrels of proven oil and gas reserves],
it will have a small sort of hold over Chinese development.
We looked at the map of the
globe on this one. Although the Pacific Ocean is huge, but between
the two, the U.S. has an impressive presence not only in Japan
but also in other parts of Asia, which brings the two very close
on this one. But any form of war is out of
the question, except for a 'commercial' war, which was started
when the Senate approved an amendment on 13th July that would
require the secretary of state to report to Congress before any
takeover of American assets by a government-controlled foreign
company.
The financial hold on China
will hold, but only if deals such as these, are thwarted by the
U.S.! Round one to the U.S. but how many rounds will
there be?
Source: NY Times
A share
to consider: SASOL
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Julian D.W. Phillips
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