MORNING BRIEFING: Review by China of its reserves in euros?

[RTFX-Trading]

MORNING BRIEFING: Review by China of its reserves in euros?

What’s new :
China: Review denied by a Chinese official
USA: Increase rate closer than expected?
Geithner tour: Stops in London and Berlin
Japan: Exports increases
OECD: Growth forecasts up

Today:


Rates in Asia and Indices:
EURUSD: 1.2386 - 1.2153.
USDCHF: 1.1615 - 1.1528.
GBPUSD: 1.4468 - 1.4367.
EURJPY: 110.80 - 109.20.
USDJPY: 90.22 - 89.81.
DowJones: 9'974 .45 -0.69%
NASDAQ: -0.68% 2'195 .88
S & P 500: -0.57% 1'067 .95
Nikkei: 9'595 .39 +0.76%
Shanghai +0.25% 2'632 .34
Gold: $ 1'217 .85
Oil Gross: $ 71.86

Comments:
After the denial by a Chinese official of rumors in the U.S. press of a possible revision of China's reserves invested in the Eurozone bonds, this morning the euro has rebounded from its low of the night at 1.2153. The Chinese official said that the policy of diversification of the Central Bank of China, which holds the largest foreign reserves in the world, has not changed. For some analysts, however, it seems that China has already begun to diversify its reserves, directing them to the countries producing raw materials and to other Asian nations. These observations have led coverage of short positions this morning.

After the doubts of Mr. Lacker yesterday over a prolonged period of low interest rates, another official of the Fed spoke on the subject. Mr. Bullard said that a misinterpretation of the concept of a prolonged period carries risk. With signs of U.S. economy accelerating its recovery, at the next Fed meeting there could be more votes in favor of a rate adjustment.

U.S. Treasury Secretary T. Geithner in his European tour stop in London said that the markets waited to see the bailout for Greece of 1,000 billion dollars activated to calm fears that the crisis spread to other countries. In Berlin, where he will meet Mr Trichet and Mr. Weber, German Finance Minister, Mr. Geithner has continued his crusade by asking the European for rapid action to calm markets.

Japanese exports have registered a new record rise in April, thanks to growing demand from Asian economies, which represent more than half of total exports.

The OECD has revised upwards its growth forecast for the euro area, from 0.9% to 1.2% for 2010, when the organization expects growth for Great Britain of 1.3% this year and 2.5% in 2011. She adds, however, that to prevent inflation, rising interest rates will be necessary, citing a 3.5% level by the end of 2011 for the Bank of England.

Have a good day

Pascal Bovay

RTFX Ltd
Trading desk
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