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cbwang888 (27.42)

China rate hike: Day 1 = dump trade

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October 20, 2010 – Comments (3) | RELATED TICKERS: UUP , SMN , EDZ

 

Trading on the news is risky and usually proven wrong

 

One day USD spiked on the interest rate hike in China is proven short-lived just one day after.

 

2 factors still intact given China's rate raising:

 

* Yuan/USD pegging to be continued

      China cannot afford fast rising Yuan to kill their exporting sectors.  The net effects of pegging is rising commodities, currencies backed by commodities, PMs, foods, energy, real estates in Asia.

*  QE2 is coming soon

      While China is fighting inflation, debt-ladien US gov is still seeing deflation risks 

 

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Day one of traders fleeing emerging market seeking safe havens in USD will soon be proved as a dumbest move of the month.

Day two, smart money are already flowing back to commodities and currencies backed by commodities.

 

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USD is not really a "safe" haven since QE1. 

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Short of the day: UUP, SMN, EDZ 

3 Comments – Post Your Own

#1) On October 20, 2010 at 12:13 PM, cbwang888 (27.42) wrote:

AUD and EURO both jump 1.8% against USD ...

USD/JPY is under pressure to break 81

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#2) On October 20, 2010 at 12:17 PM, leohaas (98.73) wrote:

This is just the way it is: people overreact to news, and shortly thereafter return to business as usual. What China announced is not at all a game changer. The market realizes that now and is undoing yesterdays action rapidly.

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#3) On October 20, 2010 at 12:33 PM, cbwang888 (27.42) wrote:

 

USD index is heading to 72

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