Investigation of Motive Enhance China Japan Bond Purchase

Tokyo – Japanese Finance Minister said Thursday Yoshihiko Noda, the government is monitoring closely China’s increased purchases of Japanese government debt and will check in Beijing about his motivations.”We are giving careful attention” to the recent increase in purchases related to China against the Japanese government bond (JGB), “Noda said in a session of the parliamentary committee of financial problems, reported Dow Jones Newswires.

“I do not know the true intention” regarding China’s increasing appetite for JGB.But Tokyo plans to “work together closely (with Beijing) and assesses the point,” he said.China, in July, buying Japanese bonds worth 583.1 billion yen (6.9 billion dollars), Japan’s finance ministry said Wednesday, when the Asian giant will continue to increase purchases of Japanese debt.

This figure is higher than the value of securities purchased in June, 456.7 billion yen.The news came after the yen, Wednesday, 15 highest-reaching new year against the dollar. Currency traders said the yen berdenomiasi China’s purchase of property, even by itself too small to boost the yen, it can support the increase in the currency indirectly.

For the first half of this year, China bought debt worth 1.73 trillion yen, almost seven times over a full year’s record of about 253.8 billion yen in 2005.In May alone China investors buy Japanese government bonds net worth 735.2 billion yen.China seeks to diversify its investments out of the big bucks and Europe since the beginning of the financial crisis.Most bonds are purchased by the government of China is estimated to be used to manage foreign currency reserves.

This increase is in conjunction with the re-doubt recovery in the United States and Europe, and indicates China’s store more foreign currency reserves which as a result continues to expand into the Japanese bonds are relatively stable.With approximately 95 percent is held by domestic investors, the risk did not pay the debt of Japan is considered much smaller than the countries hit by the-debt, even though its public debt approaching 200 percent of gross domestic product, the highest among developed countries.

China’s foreign exchange reserves have swelled in recent years, soaring to a record 2.454 trillion dollars at the end of June.These reserves, has become the world’s largest, grew 15.1 percent from a year ago, China’s central bank said in its website.One way Beijing is diversifying its investment through an independent wealth fund China Investment Corp., which handles about 300 billion dollars and has invested heavily in resource companies.(AFP)

London Euro slumped back against the U.S. dollar on Monday

London Euro slumped back against the U.S. dollar on Monday, as investors adjust positions ahead of Federal Reserve meeting, which some believe could announce new measures to boost the sluggish recovery.Dealers said the euro rose in early trading very strongly supported by the German trade figures which show Europe’s economic giant will help drive growth across the region.As the day develops, markets anticipate that the Fed could announce new stimulus steps in a meeting on Tuesday which will be positive for the dollar with the increase in U.S. economic prospects.

However, choppy trade with investors reluctant to make big commitments awaiting the Fed’s statement after the closely watched U.S. jobs report on Friday is much worse than expected.In late trading in London, the euro was at 1.3236 dollars, the highest in the early retreat of around 1.3283 dollars, down from 1.3276 dollars late Friday in New York.

Against the Japanese yen, the dollar is stronger at 85.86 yen from 85.48 yen on Friday.Michael Hewson of CMC Markets in London said the attention of everyone there at the Fed.”The results that will dominate this week’s sentiment   What will become of certain records would be a tone of language used in the statement of work, especially after the data is weaker than expected on Friday,” said Hewson.Forex.com said Jane Foley of choppy trade “as the market grappled with the possibility of facing the Federal Reserve.”,”Payrolls Friday may have been disappointing, but the market still was not sure because if the data illustrate a major slowdown in U.S. economic sukup” which will prompt the Fed to take new action, he said.

With interest rates near zero percent, analysts had suggested the Fed could mempertimbangkankebijakan based monetary stimulus, including a new pumping money directly into the system to increase the demand for credit.Earlier, Germany’s second largest exporter in the world after China, said exports in June surged 28.5 percent to 86.5 billion euros (115 billion dollars), the highest level since October 2008.

Meanwhile, imports surged 31.7 percent to reach a new record of 72.4 billion euros, meaning that the German trade partners also work well.”This has increased the possibility of Germany’s economy grew faster in the second quarter from the previous assumptions,” said Commerzbank analyst, Simon Junker.In London trading, the euro changed hands at 1.3236 dollars against 1.3276 dollars on Friday, at 113.65 yen (113.50), 0.8297 British pounds (0.8326) and 1.3851 Swiss francs (1, 3788).Dollar stood at 85.86 yen (85.48) and 1.0466 Swiss francs (1.0378). The pound was at 1.5951 dollars (1.5941).On the London Bullion Market, gold prices slid to 1203 dollars per ounce from 1207.75 dollars per ounce on Friday. (  AFP) –

President Barack Obama welcomed China's announcement Saturday that it will allow a more flexible exchange rate for its currency

BEIJING  President Barack Obama welcomed China’s announcement Saturday that it will allow a more flexible exchange rate for its currency, saying it would help protect the economic recovery.The announcement by China’s central bank suggested a possible break from the yuan’s two-year peg to the U.S. dollar – a source of friction between the two countries – but ruled out any large-scale appreciation.The People’s Bank of China mentioned no specific policy changes, though markets will be watched closely Monday for the announcement’s effects. Chinese officials have said all along that reforms of the yuan, also known as the renminbi, or “people’s money,” will be gradual.”It is desirable to proceed further with reform of the RMB exchange rate regime and increase the RMB exchange rate flexibility,” the central bank said in a statement posted on its website.

The announcement, timed just before President Hu Jintao’s trip to the G-20 summit in Toronto, Canada, follows warnings from Beijing earlier this week against making its currency policies a main focus of the meeting.Beijing kept the yuan frozen against the dollar to help Chinese manufacturers compete amid weak global demand. It faces pressure from the United States and other trading partners who contend the yuan is undervalued.

“China’s decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy,” Obama said in a statement.U.S. Treasury Secretary Timothy Geithner called the move an “important step.””But the test will be how far and how fast they let the currency appreciate,” he said.The European Commission also welcomed the decision, saying it would help achieve more sustainable global economic growth, reduce trade imbalances and strengthen the stability of the international financial system.

But the announcement is unlikely to satisfy critics in the U.S. Congress, who argue that an undervalued Chinese currency gives China’s exporters an unfair advantage, costing millions of American jobs.”This vague and limited statement of intentions is China’s typical response to pressure,” Sen. Charles Schumer, a New York Democrat, said in a statement. “Until there is more specific information about how quickly it will let its currency appreciate and by how much, we can have no good feeling that the Chinese will start playing by the rules.”

Signs that a global economic recovery has taken hold have prompted speculation that China would begin letting the yuan resume a gradual appreciation against the U.S. dollar that began in 2005 but was halted abruptly in 2008 as the global financial crisis took effect.Since then, the yuan’s value has remained at roughly 6.83 to $1, although it is formally pegged to a basket of currencies that includes the U.S. dollar.

“It definitely sounds significant. They’re saying they’re going to press forward,” Stephen Green, an economist at Standard Chartered Bank in Shanghai, said of Saturday’s statement.”We didn’t ever think they were going to do a big one-off, so it looks like that’s not going to happen,” he said. “We’re going to see more movement around a basically stable exchange rate until the global economy is basically healthier. The proof will be in the pudding on Monday.”

Chinese officials have warned that any adjustment to the exchange rate is not other countries’ concern.The director of the international department of the People’s Bank of China, Zhang Tao, told a news conference Friday that Chinese leaders will not discuss the yuan at the G-20 summit.

Saturday’s statement pointed to economic growth both inside and outside China as a reason for the increase in exchange rate flexibility.”The global economy is gradually recovering. The recovery and upturn of the Chinese economy has become more solid with the enhanced economic stability,” the central bank said.However, it indicated no major policy changes, adding: “The exchange rate floating bands will remain the same as previously announced in the interbank foreign exchange market.”(AP)

Violence erupted in the Swiss city of Geneva

Violence erupted in the Swiss city of Geneva Saturday as a scheduled peaceful protest of a World Trade Organization conference turned violent and police had to use tear gas and rubber bullets.Thirty-three arrests have been made and police were on the streets working to maintain order, authorities said. There was one minor injury reported: An 80-year-old woman in a walker suffered a head bruise when she fell during the tumult of the demonstrations.The demonstration started around 2:30 p.m. (8:30 a.m. ET) and about 3,000 people turned up in the central part of town, Geneva police spokesman Patrick Puhl told CNN. World Trade Organization ministers will hold a conference next week.”There were three groups who came seeking violence,” Puhl said.”The troublemakers quickly began attacking banks, hotels and shops, smashing windows and burning four cars, so we had to stop them using tear gas and rubber bullets,”The general theme for discussion at the conference is “The WTO, the Multilateral Trading System and the Current Global Economic Environment.”