How to play China’s currency nervousness
Today's Financial News - Posted May 19, 2009
It is hard to blame China for doing what it is doing. If you had a trillion dollars riding on the American economy, you would probably be a bit nervous as well.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): The headlines are stunning, but not surprising. It is a move I predicted and even prepared readers for. Unfortunately, the action is far from over.
China, fed up with being financially dependent on the American dollar, is doing everything it can to wean itself off the greenback. This week, Beijing is teaming up with Brazil to dump the dollar.
Instead of making transactions in dollars and cents, the trading partners are planning on creating a system based on their domestic currencies, the renminbi and the real. That way, no matter what the Obama administration does to the value of the American currency Brazil and China will control the value of their trades.
Their contracts will be predictable and stable, unlike the political action in Washington these days.
This news follows closely with China’s recent call for striking the dollar as the world’s de-facto currency. With nearly a trillion dollars in its reserves, Beijing is getting nervous.
Dumping the dollar
If the dollar is about to weaken significantly (which Beijing obviously believes is the case), China cannot afford to be adding even more dollars to its coffers as its trade surplus with the States swells.
I, along with many analysts, am expecting brash and radical moves.
As investors, there are many ways to play the situation. But only one way to truly take advantage of the powerful profit potential. The key is the commodities market.
Look at it this way. Commodities are priced in dollars. If the dollar weakens, their value has to rise. If not, the companies producing the goods lose money.
Just look at what happened to the oil market when the dollar weakened last year. Record highs!
Beijing is well aware of the ties between the currency and commodity markets. No wonder it recently bought record amounts of several commodities. It is buying them cheap, storing them in its massive reserves, and planning to sell the stockpiles when the dollar drops and the commodities market soars.
It is going to happen sooner than most think.
One metal in particular is in China’s sights. Even better, just one American company is producing the metal.
I recently wrote a special report detail this profit opportunity and the option contract you need to put four-digit gains in your portfolio.
It is posted on the TFN Strategic Trader web site. To read it, simply click here.
Reading it could be the most profitable five minutes of your life.
Next Article: Eye on volume: Another look at a strong indicator
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