Tuesday, November 11, 2008

China to the Rescue

China anoounced yesterday a $586 billion stimulus boost to their economy. This plan to sustain its economy spurred gains in stocks, metals and oil.

The Chinese government pledged ``fast and heavy-handed investment'' in housing and infrastructure through 2010 and a ``relatively loose'' monetary policy, according to a State Council statement yesterday.

``This plan is, by all measures, too large to be ignored,'' said Kevin Lai, an economist at Daiwa Institute of Research in Hong Kong. China may ``help the rest of the world by creating more demand for foreign goods and services.''

The markets have totally agreed and have not ignored at all. The biggest benificiary of the plan so far has been Latin American currencies, led by Brazil and Chile. The Chilean Peso rose 1.3% to 629.05 as a great majority of the Chinese plan was to spend on infastructure. As China accounted for 27% of the worlds growth last year this is spending that can have far reaching benifits.

``Since a good part of the stimulus plan from China points to infrastructure projects, we'll likely see boosted demand for copper,'' said Juan Pablo Castro, an economist at Banco Santander SA in Santiago. ``That's great news for Chile.''

In Brazil it is a similar story as Bill Rudman, who helps run a $3 billion emerging equity fund at WestLB Mellon Asset in London said.

``What's good for China is good for Brazil,'' .

The Chinese package is equivilent to 1/5 of the countries GDP last year and is expected to be used up by the end of 2010.

In reading this and seeing how other governments are responding to this crisis it strikes me that all of this aggressive action should shorted the period of recession that we sustain. Or at least I hope so.

Good Luck and Good Currency Trading.



Anonymous Anonymous said...

Great write up you have there, explained what foreign currency trading is in a nutshell and also the various factors that influences the exchange rates in the forex. Keep the great posts comin!

12:59 AM  

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