China sees strong commodities, weak dollar in 2011

The Chinese central bank warns that the deepening debt crisis will put upward pressure on commodities while continuing to put downward pressure on the dollar.

Reuters
Retrieved story from THE BALTIMORE SUN
5:12 a.m. EDT, March 25, 2011

BEIJING (Reuters) - Loose monetary policies in developed economies will place more upward pressure on global commodity prices and weigh on the dollar this year, the Chinese central bank said on Friday.

In a report reviewing the performance of global financial markets, the People's Bank of China also warned of a deepening of the European debt crisis, though its broad view was colored with optimism.

"We expect that the world economy will keep recovering, and the foundation for the recovery will be firmer," it said in the 125-page report.

In a brief discussion of risks, it pointed to Europe's debt woes as well as inflation and the potential for asset bubbles in developing markets.

On balance, however, it said that the dollar would fare worse than the euro.

"In 2011, the dollar will be on a downward trend overall, because of the slow recovery of its economy, low interest rates and twin deficits," the central bank said. "The possible spreading of European sovereign debt crisis and geopolitical risks may push up the dollar in some periods."

It noted that short-term interest rates in major economies would gradually rise as their recovery solidifies.

"But as the global recovery momentum is not strong, the increases will not be too large," it said.

Looking at global commodities, it said that wealthy nations were printing money to kick-start their economies and this would inevitable push up prices.

"Developed countries will continue with their loose policies and global liquidity will remain ample, which will keep prices of commodities, especially crude oil and grains at high levels," it said.

Concerns about inflation would trigger demand for gold as a store of value, but the precious metal's bull run may be near its end, it added.

"We need to note that gold prices have reached historical highs, and its downward risks should not be overlooked," the central bank said.

It said the global recovery depended in large part on coordination between major economies.

"All countries should avoid competitive devaluation of their currencies and pay more attention to risks brought by excessively loose policies on the back of a global recovery," it said.

The central bank reiterated that China would make its currency more convertible under the capital account, a long-standing pledge that has resulted in only incremental progress so far.

"We will relax restrictions on cross-border capital transaction activities in a selective and step-by-step manner, making sure that all risks are effectively under control," it said.

(Reporting by Langi Chiang, Kevin Yao, Aileen Wang and Simon Rabinovitch; Editing by Ken Wills)

Copyright © 2011, Reuters

To see original article CLICK HERE

Follow Us

Share Page

Login

Get access to the latest trading information, tools to help your investing, and much more!

Login   Sign Up

Search

Weekly Charts

Current Spot Prices

Gold$1195.90
Silver$16.08
Platinum$1198.00

Special Offers

 
 
© 2012 Swiss America Trading Corp. All Rights Reserved.   |   Privacy Policy   |   Site Map   |   Contact Us   |   Mobile Version
SWISS AMERICA and Logo are trademarks of Swiss America Trading Corp.
Where did you hear about us?
Roger HedgecockRay Lucia
Pat BooneMichael Savage
Bill CunninghamOther
iHeart Radio/Rush Limbaugh
×