The USD Reserve Exodus Continues - Australia Diversifies Reserves Into China

Tyler Durden's picture

As we have discussed numerous times over the past year, there is a quiet movement among the world's central banks to diversify their reserves away from the pejorative USD. Whether it is direct trade linkages, hording physical precious metals, or simply buying foreign sovereign debt, there is a trend emerging. The latest defection, as BusinessWeek reports, is Australia's plan to invest about 5% of foreign currency reserves in China. The decision "represents the first time that the RBA will have invested directly in a sovereign bond market of an Asian country other than Japan," the country's deputy governor noted, adding that this step was an "important milestone" to "stronger financial linkages" leaving Australia "better positioned to benefit from the shift in global economic growth towards Asia." Of course, palling up to its closest trade partner is a big driver, but in a somewhat barbed comment on the strength of the AUD, Lowe noted, "quantitative easing that has taken place in a number of countries is having a significant effect on exchange rates of freely floating currencies... which is clearly making for difficult conditions in certain parts of the Australian economy."

 

Via Bloomberg BusinessWeek,

Australia’s central bank plans to invest about 5 percent of its foreign currency reserves in China as it deepens ties with the world’s second-largest economy, Deputy Governor Philip Lowe said.

 

The decision “represents the first time that the RBA will have invested directly in a sovereign bond market of an Asian country other than Japan,” Lowe said in a speech today in Shanghai. “It reflects the broader economic relationship between China and Australia and our increasing financial ties.”

 

...

 

“By opening their capital markets to central banks like Australia’s, China is taking a step in liberalization for foreign investors,” said Martin Whetton, "... The bigger question will be if this is followed by investments from other central banks.”

 

...

 

The move is “another important milestone in deepening our financial and economic linkages with China,” Australia’s Treasurer Wayne Swan said in an emailed statement. “Strong financial linkages between our economies will ensure that Australia is even better positioned to benefit from the shift in global economic growth towards Asia.”

 

...

 

The move reflects “greater diversity of our investments”

 

The Australian dollar became the third major currency to directly trade with the yuan on April 10, after the greenback and Japan’s yen.

 

...

 

Chinese investment in Australia has risen more than five- fold since 2006 and reached about A$20 billion at the end of 2011

 

...

 

“One current example of this is related to the very high value of the Australian dollar, which is clearly making for difficult conditions in certain parts of the Australian economy,” he said. “The quantitative easing that has taken place in a number of countries is having a significant effect on exchange rates of freely floating currencies

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Pladizow's picture

Sha-na-na-na-na......

MillionDollarBonus_'s picture

If you want to gain a deeper understanding of why the stock market is performing so well, here are some of the green shoots on the radar that long term investors and economists are analysing very closely:

  1. Record number of college educated Americans, which many top economists believe to be a major factor that will benefit America’s economy in years to come
  2. The continued subjugation of the VIX, which negates claims about a potential ‘market crash’
  3. Record low mortgage rates and a strong housing recovery
  4. Record low inflation, which leaves plenty of room for further purchase programs and monetary easing
GetZeeGold's picture

 

 

.....or they're just printing money our of thin air and buying equities with it.

ejmoosa's picture

I have always thought I would eat more often at McDonald's if I could converse with a college graduate while waiting for my Mystery Nuggets and Fries.

ParkAveFlasher's picture

That's genius, kind of like a "Hooter's" for smart, gregarious people.

DaveyJones's picture

Ah, the nuggets

that's one mystery you do not want to solve

krispkritter's picture

They should be sued for false and misleading advertising for calling them 'Chicken McNuggets'.  They should be forced to rename them 'McWhat? Nuggets'  

DaveyJones's picture

they should just be sued

for calling it food

notbot's picture

China is a train wreck.. Diversify out of the dollar? Yes. Into the Renminbi? You're joking.

You're investing in a real estate co that develops large-scale empty cities and malls, just b/c the CEO is an empire builder. 

Remind me...didn't central banks bottom tick gold?

Groundhog Day's picture

I had a conversation with a former Mcdonald's employee who worked in the manufacutering facility.  His quote "the things i've seen, you couldn't pay me to eat that crap"

DaveyJones's picture

MDB you're sarcasm is brilliant

what scares the shit out of me is that you sound exactly like my television

azzhatter's picture

I've wondered if MDB is secretly a CNBC employee?

Rustysilver's picture

azzhatter,

He works for the White House: or he's a moron. Sorry for being redundant.

gtb's picture

You won't be scared if you turn off the TV and quit reading his crap.

Dangertime's picture

Don't forget record defaults on college loans.

 

And record low inflation...Gas from .99 cents to $3.85 a gallon in 13 years.  Gotta love low inflation.

DaveyJones's picture

don't worry energy is an inconsequential discretionary commodity

it's not like people kill for it.

FreeNewEnergy's picture

MDB, yes, I see the strong housing recovery. People around here are, as soon as they think they're "even," put their house up for sale and bolt to a rental unit. This trend should continue until the 3% down FHA suckers default and the wash, rinse, repeat cycle starts all over again.

Recovery now. Insolvency later.

Go Tribe's picture

1. Bubble

2. Bubble

3. Bubble

4. Bubble

caShOnlY's picture

1. Record number of college educated Americans, which many top economists believe to be a major factor that will benefit America’s economy in years to come

No jobs available for the highly indebted college educated Americans.

2. The continued subjugation of the VIX, which negates claims about a potential ‘market crash’

Massive money creation by FED eliminates risk in market and put massive risk on USD. NOTE*** see PRECIOUS METALS DEMAND!

3. Record low mortgage rates and a strong housing recovery

No jobs and stagnant incomes and lack of buyers except for hedge funds and Wall St. "hedging" against the currency collapse.

4. Record low inflation, which leaves plenty of room for further purchase programs and monetary easing

The record low inflation is DEFLATIONARY, depression, all is hidden by money printing and governement spending(foodstamps, etc.).  Car loans are up to 97 months correalates with low income and part time job creation.

One big blip on the RADAR:  Global banking, financial, economic collapse is on the way. 

 

kliguy38's picture

Bullion Banks already defaulting on gold delivery......stay tuned ast the "smart money" with "allocated" gold in these bullion banks resort to shitting themselves....Soon they will be getting on their helicopters and flying to Zurich, London, and Paris to find out just WHO has swindled them......THEN they will send in "Frank"

LawsofPhysics's picture

"THEN they will send in the tanks" - fixed.

BattlegroundEurope2011's picture

 

Meet the banksters who set gold prices.

http://www.goldfixing.com/today'sprices.htm

 

bump.

 

Send them a little message ;)

GoldForCash's picture

5 percent today...95 percent Tommorow

Groundhog Day's picture

Aussie's are now on the terrorist watch list.  All of them

Groundhog Day's picture

Additionally, they are bowing to their true chinese masters

MonsterBox's picture

5%...meh.  Awake me when they're in for 50%.

and fuck you, Ben

LawsofPhysics's picture

They stopped printing Yuan?  fiat is fiat is fiat.  Fuck you Ben and all Central Wankers.

krispkritter's picture

I hope that rat bastard Ben is the last rat left on the sinking ship, USS Dollar...would be great to see the rest of the rats swimming off to their own respective sinking ships too. The world would be a better place with fewer of these blood sucking parasites...

RafterManFMJ's picture

Nah it'd be better to watch the mass of drowning rats chew each other to bloody pieces, bleeding, drowning, and sinking.

DaveyJones's picture

it's almost as if...they don't trust us

this is the war we can't win

because we planted our own bombs

and they're bigger than a backpack

LawsofPhysics's picture

Indeed, financial "products" of mass destruction.  The same puppet masters at work either way, fuck em.

DaveyJones's picture

Why, when we read history, do these "gentlemen" do this over and over and over

don't answer that

just turn to the chapter where we punish them 

Debugas's picture

it is normal to have some reserves in currencies/bonds of the trade partners you are buying products from

LawsofPhysics's picture

Exactly.  This is the more important issue.  Fiat is fiat, but trade is the real issue.  When goods and services stop crossing borders, troops will.

DaveyJones's picture

the perjurative USD

Investor-1's picture

There is so much going on on the currency markets the last few years. It's a paradise for forextraders! I copy good forextraders and that works great! Made me a lot of money.

caimen garou's picture

hey ben how does it feel to be the hated kid on the block, you blockhead!

Sheeple Shepard's picture

 

 

"Australia’s central bank plans to invest about 5 percent of its foreign currency reserves in China" 

 

 

Gotta be USD right? So the Chinese promise a stable (Gold backed?) currency to convince C.Bs to buy their government bonds. They then recieve USD as payment for bonds and use these USDs to buy Gold? The US is getting screwed big time if this happens for any length of time or in any high volume. 

 

DaveyJones's picture

as far a screwing is concerned, you have the er and the ee all mixed up