ForexSpirit

The big news yesterday in the currency markets was that China is looking at diversifying its currency reserves. It wasn’t exactly new news and no additional details were provided about what sort of diversification will take place, but the announcement came at the ECB Central Banking Conference in Frankfurt being held this week and so it was picked up by the news agencies when Chinese central bank chief Zhou talked with Reuters.

Since they have over $1 trillion dollars in reserves, most of it in dollars, it only makes sense for them to spread that amount around a bit, to protect themselves against any slide in the value of the dollar. Of course, enacting the diversification process will cause the dollar to weaken, so they are in a bit of a bind, as diversifying will self-fulfill that which they are trying to protect themselves against.

This issue could be a large theme going forward, especially as part and parcel of discussions that I’m sure will be started by the newly Democratic controlled US goverment about trade between China and the USA.

My trade from Tuesday night was closed yesterday shortly after the consumer sentiment number came out as price popped into Q4. Closed out at 1.2804 at my limit order level, before the news from Zhou was released, or I would have surely held on for more.