The Shifte From Petrodollar to Petroeuro Is Here

[Polly]

Get riel: move to ban US dollar

By Charles McDermid and Cheang Sokha

Renewed calls to remove the US dollar from widespread circulation in Cambodia are drawing bipartisan support, and some high-ranking government officials are calling the ban a pressing matter of national sovereignty and pride.

A positive progression to some, an inconvenient eventuality to others, the move to finally "de-dollarize" the Cambodian economy has been sidelined for years by the government and monetary groups reluctant to heap hiccups into an otherwise bullish economy.

"Cambodia has extremely high levels of dollarization-our estimates are something in reality close to 90 to 95 percent," said Jeremy Carter, advisor to the Asia and Pacific Department of the International Monetary Fund. "This makes it an exceptional country."
A recent National Assembly presentation by Sam Rainsy Party lawmaker and economist Tiolong Saumura has re-surfaced the state currency debate.

Saumura is unequivocal on the issue, and has given rationales ranging from interest rates, to money laundering, to Cambodians' trust in their own economy and government.

"Decree it. Ban it! This is unthinkable in other places," Saumura said. "One of the accomplishments of the [European Union] was that member states surrendered part of their national sovereignty to adopt the Euro. This is a huge thing to give away. In our case we gave it away without getting anything in return. It's like we're funding the trade deficit of the US."

Now, politicians and economists are studying initial ways to embark on the de-dollarization gambit, and some are saying policies to rid border regions of an increasing infiltration of Vietnamese dong, Thai baht and Lao kip, are long overdue.

"When I made my statement a lot of MPS, especially from the CPP, were nodding their heads in agreement. It's a matter of principle: when you're in a country you're only supposed to use the national currency," said Saumura, a former vice-governor of the National Bank of Cambodia and the current chair of the Inter-ministerial Committee Against Money Laundering. "Monetary policy is an important tool for the stability of the macroeconomic situation. It allows a central bank to steer the amount of liquidities put at the disposal of the economy. At present we are not in control of our money supply. The Cambodian Bank and the government is not in control of the mass of money in circulation."

Saumura, a member of the 150-nation Inter-Parliamentary Union's Standing Committee for Sustainable Development, Finance and Trade, first published a report on banning the dollar in 1994.

"To de-dollarize is even more important now: there's more trade. In 1993 we had no garment factories. We have more tourists now and the economy is more internationalized and more accelerated," she told the Post. "Cash, usually the US dollar, is still used for big transactions. What's more surprising is the dollar is used for small purchases, too. It's psychedelic."

(snip)

http://www.phnompenhpost.com/TXT/current/stories/1612/get.htm

[Polly]

UAE won't rule out dropping dollar peg

by Dylan Bowman and Reuters on Sunday, 24 June 2007

The UAE has not ruled out dropping its currency’s peg to the dollar, but would only do so with the support of other GCC nations, the country’s central bank governor said today.

“For the UAE I can say comfortably and surely that we will not move alone and we will move with other GCC countries,” Sultan Nasser Al-Suweidi told reporters, speaking on the sidelines of the annual meeting of the Bank for International Settlements in Switzerland.

“We will all be together in it. No we are not ruling out, but we will have to move together,” he added.

Al-Suweidi’s comments are the clearest indication yet that the UAE would consider dropping the dirham’s dollar peg.

Previously Al-Suweidi has said the UAE is “committed” to keeping its currency pegged to the dollar at a fixed rate.

http://www.arabianbusiness.com/index.php?option=com_content&view=article&id=495048:uae-is-not-ruling-out-dropping-dollar-peg&Itemid=69

[The Smoking Man]

The USA also went 'hard line' on the Saudis and told them no more 'aid' (Against the wishes of one G.W.Bush)

They carefully aimed at their big toe and pulled the trigger.

 

[Polly]

July 11 (Bloomberg) -- Japan, the largest overseas holder of U.S. Treasuries, should invest $700 billion of its currency reserves in higher-yielding assets such as stocks and corporate bonds, said Takatoshi Ito, an adviser to the prime minister.

The reserves should be managed by a special fund that will gradually diversify into euros, Australian dollars and emerging- market currencies, Ito said in an interview in Tokyo.

Central banks in South Korea, China and Taiwan have announced plans to buy assets with higher returns than U.S. debt, contributing to a 7.4 percent drop in the dollar against the euro in the past year. The establishment of sovereign wealth funds, pioneered by Singapore in 1981, may also reduce demand for Treasuries, pushing up U.S. borrowing costs.

``Japan should make more use of its reserves, following Singapore's example,'' said Yuji Kameoka, senior economist and currency analyst at Daiwa Institute of Research in Tokyo. ``In order to manage these funds safely, a more appropriate amount is $300 billion.''

The dollar reached a record low of $1.3784 per euro yesterday, and was little changed at $1.3746 at 7:34 a.m. in London, on speculation loan defaults among home owners with poor credit histories will weigh on the U.S. economy. The yen traded at 121.21 per dollar, after reaching a one-month high of 120.99.

(snip)

http://www.bloomberg.com/apps/news?pid=20601080&sid=aoJJUD7FH_7Q&refer=asia

[Polly]

July 13 (Bloomberg) -- Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran's central bank said it is reducing holdings of the U.S. dollar.

Iran wants yen-based transactions ``for any/all of your forthcoming Iranian crude oil liftings,'' according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments ``effective immediately,'' according to the letter, dated July 10 and obtained by Bloomberg News.

The yen rose on speculation for an increase in demand for the currency, the result of Japan's annual 1.24 trillion yen ($10.1 billion) of oil imports from Iran. Central bankers in Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets because of the weakening currency.

``What else can Japan do but to accept the request, once the oil producer sent its wish?'' said Hirofumi Kawachi, an analyst at Mizuho Investors Securities Co. in Tokyo. ``The tensions between the U.S. and Iran are escalating, and it's Iran's measure to hedge risk.''

A spokesman for Iran's oil ministry in Tehran said he could neither confirm nor deny that the letter had been sent. Most Japanese oil refiners have until now used U.S. dollars to pay Iran for oil, said the spokesman, who declined to be identified by name because of government policy.

Yen Advances

The yen advanced to 122.07 per dollar at 2:30 p.m. in New York, from 122.42 late yesterday.

Iran is cutting its U.S. dollar reserves to less than 20 percent of total foreign currency holdings, and will buy more euros and yen as tensions with the U.S. increase, Central Bank Governor Ebrahim Sheibany said on March 27.

(snip)

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQ0xJnoltfXY&refer=home

[The Smoking Man]

Bush seems to be aiming at his big toe with a Howitzer.

[Polly]

Everybody remembers what happens in 2011?

Saudi Arabia 'to keep dollar peg until 2010' 

RIYADH: Saudi Arabia will ride out the latest spell of dollar weakness and maintain the riyal's exchange rate against the US currency at least until 2010, Jadwa Investment said in a research note.

"None of the arguments that have been put forward for an adjustment to the exchange rate are compelling given the cost in terms of monetary policy credibility, lost revenues and damage to non-oil competitiveness," Brad Bourland, Jadwa's head of research, said in the note.

Markets have been betting delays to a regional monetary union project and the dollar's decline to record lows against the euro this month would tempt some Gulf states to change dollar-pegged exchange rates, especially after Kuwait broke ranks and adopted a currency basket in May.

"The riyal's peg to the US dollar will remain unchanged at the current level of 3.75 Saudi riyals throughout our forecast period (2007-2010)," Bourland wrote.

"A revaluation would impair the riyal value of oil revenues and assets denominated in dollars held by the government, banks and companies," he added.

Saudi Arabia cannot allow its currency to float freely as it would add more uncertainty to an economy that is already vulnerable to oil price fluctuations, Bourland said.

The central bank, the Saudi Arabia Monetary Agency (Sama), has repeatedly said it does not plan to change exchange rate policy.

"It's (Sama's) vast stock of foreign assets gives it the ammunition to defend the peg. Therefore, while there may be occasional speculative pressure on the peg, it will not change," Bourland said.

Sama's net foreign assets were worth 98.5 billion riyals ($26.27bn) at the end of May. Jadwa expects inflation to rise from 2.3 per cent last year to 3.5pc this year before slowing to 3.3pc and 2.7pc in next year and 2009.

Jadwa forecast real gross domestic product growth of 2.7pc this year and 6.3pc next year, driven by non-oil private sector and government spending. The economy grew 4.2pc last year.

http://www.gulf-daily-news.com/Story.asp?Article=188635&Sn=BUSI&IssueID=30127
 

[Polly]

Dollar's double blow from Vietnam and Qatar
By Ambrose Evans-Pritchard
Last Updated: 12:12am BST 04/10/2007


Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that Asian central banks with control over two thirds of the world's foreign reserves may soon join the flight from US assets.

The Saigon Times said this morning that the State Bank of Vietnam was abandoning the attempt to hold down the Vietnamese currency through heavy purchases of dollars. The policy is causing the economy to overheat, driving up inflation to 8.8pc.

Vietnam, which has mid-sized reserves of $40bn, is seen as weather vane for the bigger Asian powers.

Together they hold $3,575bn of foreign reserves, over 65pc of the world's total. China leads with $1,340bn, but South Korea, Taiwan, Singapore, and even Thailand all built up massive holdings.

The concern is that once one or two members of the region jump ship, it could set off a broader scramble. None of them want to be the last one left holding a devalued asset. Vietnam's central bank said this week that it would move "gradually" to a floating currency.

Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99pc to 40pc, switching into investments in China, Japan, and emerging Asia.

The move is intended to increase long-term returns for future generations, but it can easily be seen as a vote of no confidence in US economic management.

The drastic shift by the Qatar Investment Authority is a warning that petro-dollar powers with some $3,500bn under management may pull the plug on the heavily endebted US economy -- which needs to suck in the majority of the world's savings just to stay afloat.

"OPEC and Asia have been the two blocks funding the US current account deficit," said Hans Redeker, currency chief at BNP Paribas.

"Vietnam is a relatively small country but it is symptomatic of Asia. The entire region is seeing inflation move up as a result of mercantilist policies of holding down their currencies with 'dirty floats', which are designed to help their export sectors. They need to change monetary policy, " he said.

There have been reports that China is already pulling out of US bonds to fund its new sovereign wealth fund. Foreign central banks slashed holdings by $32bn in the last two weeks of August. We will not know which country was responsible the Treasury's TIC data is released in November.

Japan also has colossal reserves, now near $914bn, but it is does not face the same inflationary threat as the rest of Asia, and is in any case an intimate military ally of the United States.

It is likely to coordinate its dollar policy very closely with Washington for geo-strategic reasons.

Saudi Arabia set off jitters in the currency markets last month when it decided not to cut interest rates in lockstep with the US Federal Reserve, raising doubts about its commitment to the Saudi dollar peg. But it too has strong political reasons to stick with America.

Kuwait has already abandoned its peg, fearing that its economy would overheat if it continued to import America's loose monetary policies.

Separately, Iran said it would soon refuse to accept dollars for its oil exports, preferring to be paid in a "more credible currency".

It already receives 65pc of payments in euros and 20pc in yen, but insisted that the remaining 15pc in dollars entailed an excessive risk of devaluation.

The demarche is largely policitcal, since oil is a fungible commodity and the currency markets are highly liquid.

However, if a number of OPEC suppliers began demand long-term futures contracts in euros instead of dollars, this would have an impact over time.

[Polly]

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/16/bcnchina116.xml

Japan and China lead flight from the dollar

By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 1:09am BST 17/10/2007

Japan and China led a record withdrawl of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields.
 
Data from the US Treasury showed outflows of $163bn (£80bn) from all forms of US investments. "These numbers are absolutely stunning," said Marc Ostwald, an economist at Insinger de Beaufort.

Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries.

Mr Ostwald warned that US bond yields could start to rise again unless the outflows reverse quickly. "Woe betide US Treasuries if inflation does not remain benign," he said.

The release comes a day after the IMF warned that the dollar was still overvalued and likely to face "some depreciation in the medium term".

The dollar's short-lived rally over recent days stopped abruptly on the data, increasing pressure on US Treasury Secretary Hank Paulson to shore up Washington's "strong dollar" rhetoric at the G7 summit this week.

The Greenback has already fallen below parity against the Canadian Loonie for the first time since 1976 and has touched record lows against a global basket. It closed at $2.032 against the pound.

David Woo, an analyst at Barclays Capital, said Washington was happy to see the dollar slide. "They don't care so long as the fall is not disorderly. They see it as a way of correcting the deficit. " he said.

Mr Woo said a chunk of the August outflows may have come from foreigners borrowing in the US during the liquidity crunch to meet needs in euros. "We think it may be a one-off," he said.

The US requires $70bn a month in capital inflows to cover its current account deficit, but the key sources of finance are drying up one by one.

BNP Paribas said America has relied on "hot money" from abroad to cover 25pc to 30pc of the US short-term credit and commercial paper market over the last two years.

This flow is now in danger after the seizure in parts of the market over the summer and after the Federal Reserve's half point rate cut, which has shaved the US yield advantage over other countries.

Ian Stannard, a Paribas currency analyst, said the data was "extremely negative" for the dollar. "It exceeds the worst fears. It is not just foreigners who are selling US assets. Americans are turning their back as well," he said.

Central banks in Singapore, Korea, Taiwan, and Vietnam have all begun to cut purchases of US bonds, or signalled an intent to do so. In effect, they are giving up trying to hold down their currencies because the policy is starting to set off inflation.

The Treasury data would have been even worse if it had not been for $60bn of inflows from hedge funds based in Britain and the Caymans, which needed to cover US positions at the height of the credit crunch.

[The Smoking Man]

This goes back to that old saying ... Be careful what you wizh for ... You just might get it.

 

[Polly]

&^*&%&%!! Absolutely no rebounce!



An article worth reading.

http://www.321gold.com/editorials/willie/willie110907.html

[Polly]

China's Attempt to Convert its U.S. Treasury holdings into euros

By M.CAM Inc

11/29/07 --- - As I discussed previously, the Chinese currency wild-card may become relevant far sooner than expected. An effort by China to convert its $1.4 trillion U.S. Treasury holdings into euros is not viable for many reasons -- not the least of which is the European Central Bank's inability to absorb such an event. As China continues its rush away from supporting U.S. Treasuries and as Middle Eastern investors are buying them up in more diversified holdings, a new "currency exchange" is unfolding. Realizing that they cannot liquidate their holdings, it appears that the Chinese are currently using their U.S. Treasury holdings as collateral for euro denominated purchases and long term infrastructure transactions. In other words, they may be "liquidating" their holdings as collateral and, in so doing, effectively migrating to non-dollar value without ever having to officially dump their current Treasury holdings. Therefore, collateralize the credit in dollars -- especially if you're long in dollars. The lender/financier won't call the note because you have it structured in such a way to both allow it to perform and hold illiquid collateral that no one wants. This essentially inflates euros. Although you can't sell dollars, the whole purpose of collateral is that it is a second source of payment -- collateral is there to down rate the risk of the loan. Secondary becomes irrelevant.

When February comes, the Chinese are going to do something as they will have to decide what the exposure is going to be with the treasury. As I see it they have to just dump the treasury. They only keep it because they can use it -- they have 43% direct/indirect of US treasuries so they'll dump them on the market.

The US Congressional pressures to decouple the RMB will work, but not in the way we want. Our plan includes helping them hold on to the treasuries, it does not involve them not holding the dollar anymore. The US wanted the tether to be part of the float. This will cause disenfranchisement of the US electorate (during primary season). February is also when public (media) will realize we won't pull out of this.

[Polly]

TEHRAN (Reuters) - Iran has completely stopped selling any of its oil for U.S. dollars, an Iranian news agency reported on Saturday, citing the oil minister of the world's fourth-largest crude producer.

The ISNA news agency did not give a direct quote from Oil Minister Gholamhossein Nozari. A senior oil official last month said "nearly all" of Iran's crude oil sales were now being paid for in non-U.S. currencies.

For nearly two years, OPEC's second biggest producer has been reducing its exposure to the dollar, saying the weak U.S. currency is eroding its purchasing power.

Iranian President Mahmoud Ahmadinejad, who often rails against the West, has called the U.S. currency a "worthless piece of paper."

Foes since Iran's 1979 Islamic revolution, Tehran and Washington are also at odds over Tehran's disputed nuclear programme as well as over policy in Iraq.

"In line with the policy of selling crude oil in currencies other than the U.S. dollar, currently the sale of our country's oil in U.S. dollars has been completely eliminated," ISNA reported after talking with Nozari.Nozari told ISNA:

"In regards to the decrease in the dollar's value and the loss exporters of crude oil have endured from this trend, the dollar is no longer a reliable currency."

"This is why, at the meeting of the heads of states, Iran proposed to OPEC members that a currency (for oil exports) would be determined that would be reliable and would not cause any loss to exporter countries," he said.

At a November summit of Organization of the Petroleum Exporting Countries heads of state, Iran suggested oil should be sold in a basket of currencies rather than dollars, but failed to win over other members except Venezuela.

Ahmadinejad and his Venezuelan counterpart, Hugo Chavez, are vocal critics of U.S. influence in the world.

Hojjatollah Ghanimifard, international affairs director of the state owned National Iranian Oil Company, last month told Reuters that most of Iran's oil export earnings were in euros, with some in yen.

[Polly]

Jan. 23 (Bloomberg) -- Billionaire investor George Soros said the fallout from the U.S. subprime crisis will bring about the end of the dollar's status as the world's reserve currency.

``The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency,'' Soros said in a debate today at the World Economic Forum in Davos, Switzerland. ``Now the rest of the world is increasingly unwilling to accumulate dollars.''

The dollar's share of global foreign-exchange reserves fell to a record low of 63.8 percent in the third quarter as demand for U.S. assets waned after the collapse of the U.S. housing market, according to International Monetary Fund data. It accounted for 65 percent three months earlier. The euro's share rose to 26.4 percent from 25.5 percent. IMF quarterly figures go back to 1999, the year the euro was introduced.

(snip)

http://www.bloomberg.com/apps/news?pid=20601087&sid=aYk5JK9jvsM8&refer=home

[The Smoking Man]

Oh bull ... The US dollar only became the currency de jour after the first gold crisis.

It was the international medium of exchange ... Hence Fort Knox.

What is this guy talking about?