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AutomaticEarth<>Debt Rattle February 5 2016

Posted by Raúl Ilargi Meijer at 10:08


Harris&Ewing “Congressional baseball game. President and Mrs. Wilson.” 1917

• Dollar Tumbles As Fed Rescues China In The Nick Of Time (AEP)

• SocGen: China Only Months Away From Depleting Its Currency Reserves (MW)

• China Foreign Reserves Head for Record Drop on Yuan Defense (BBG)

• Citi: ‘We Should All Fear Oilmageddon’ (BBG)

• Just 0.1% Of Global Oil Output Has Been Halted By Low Prices (BBG)

• US Running Out Of Space To Store Oil (CNN)

• Obama Proposes $10-a-Barrel Oil Tax (MW)

• IMF Honing Tools To Rescue EMs From China Spillover (Reuters)

• BOJ Board Among Those Surprised By Negative Interest Rate Plan (Reuters)

• US Banks Targeted By Activist Investors (Reuters)

• Two Anonymous Whistleblowers Are Pounding on the SEC’s Door Again (Martens)

• Europe’s Ports Vulnerable As Ships Sail Without Oversight (FT)

• Portugal’s Anti-Austerity Budget Provokes Brussels Showdown (FT)

• Saudis Say Cash Crunch Won’t Derail an Ambitious Foreign Agenda (BBG)

• World Food Prices Tumble Near 7-Year Low (CNBC) huh?

• Julian Assange Should Be Freed, Entitled To Compensation: UN Panel (AP)

But that won’t last.

• Dollar Tumbles As Fed Rescues China In The Nick Of Time (AEP)

The US dollar has suffered one of the sharpest drops in 20 years as the Federal Reserve signals a retreat from monetary tightening, igniting a powerful rally for commodities and easing a ferocious squeeze on dollar debtors in China and emerging markets. The closely-watched dollar index (DXY) has fallen 3pc this week to 96.44 and given up all its gains since late October. This has instant effects on the world’s inter-connected financial system, today more geared to the US exchange rate and Fed policy than at any time in modern history. David Bloom, from HSBC, said the blistering dollar rally of the past three years is largely over and may go into reverse as weak economic figures in the US force the Fed to pare back four rate rises loosely planned for this year.

A more dovish Fed and a weaker dollar is a bitter-sweet turn for the Bank of Japan and the ECB as they try to push down their currencies to stave off deflation. Their task has become even harder. The euro has rocketed by more than 3pc this week to $1.12 against the dollar. In trade-weighted terms the euro is 5pc higher than it was in March, when the ECB began quantitative easing, showing just how difficult it has become for authorities to drive down their exchange rates. Everybody is playing the same game. Yet a halt to the dollar rally is a huge relief for companies and banks around the world that have borrowed a record $9.8 trillion in US currency outside the US, up from $2 trillion barely more than a decade ago. These debtors have faced a double shock from the rising dollar and a jump in global borrowing costs.

RBS calculates that more than 80pc of the debt of Alibaba, CNOOC, Baidu and Tencent is in US dollars, with Gazprom, Vale, Lukoil and China Overseas close behind. China’s central bank (PBOC) can breathe easier as it burns through foreign reserves to defend the yuan against capital flight. Wei Yao, from Societe Generale, said China’s holdings have fallen by $800bn to an estimated $3.2 trillion and are just months away from the danger zone. She warned that markets are likely to become “transfixed” on the rate of decline once reserves near $2.8 trillion, testing the credibility of the PBOC and raising the risk that Beijing will be forced to let the currency slide – with drastic global consequences. If so, only a change of course by the Fed can buy time for China to get a grip and avert a drift into dangerous waters.

Read more … Briefs or Link out for full @
http://www.theautomaticearth.com/2016/02/debt-rattle-february-5-2016/