Sunday, July 07, 2013


USD = US Dollar

JPY = Japanese Yen

GBP = Great British Pound Sterling (GBP/USD = Cable)

EUR = Euro

CNY = Chinese Yuan

The BOE (Bank of England), the ECB (European Central Bank) and the BOJ (Bank of Japan) chose to continue with their easy monetary policies, while the Fed (Federal Reserve) looks set to go ahead with it's "Tapering" (monetary tightening).

Clearly the Fed sees the weak Pound and Euro as threats to the US Exports. And, it is also clear that the Fed, the BOE and the ECB are not in-syn with their monetary policies.

But, why would the Fed still want to go ahead with "Tapering" knowing the full effect of which would be the strengthening of the USD? and hence, adverse impact on the US Exports?

Firstly, I have suspected that the Fed wants to preserve the confidence in the USD and the "world reserve currency" status.

Secondly, as I have always suspected, the Fed is working closely with the BOJ to manipulate the Currency Markets...after-all, it takes two hands to clap!

Japan (BOJ) is more than happy to work with the US (Fed), economically and politically (particularly in defense).

Given the current anti-Japan sentiment prevalent in China, the Japanese exports to China (and its domestic productions in China) had been adversely affected. And, with the Europeans in dire straits, Japan can only rely on the US to export its way out of its economic problems.

China's vast holdings of the US Treasury will be a drag on its future economic development. And, with the Fed tapering, the hot money (USD) will rush out of China adding further pressure on the Chinese Leadership. But, this is exactly what the US wants to achieve (through the Fed's Tapering)--to create problems for China.

Obama wants to create jobs in the US and the stage has been set by the Fed's Tapering to attract funds to return to the US. Businesses and Corporations, most probably the US and Japanese firms, will be thinking hard about re-locating to the US to build factory and create jobs in the US.

Hence, the US and Japan are working together and hurt the interests of the Europeans and the Chinese.

This is what I think is the real reason behind the Fed's Tapering.

Emerging markets, like Singapore, will be hurt as well. With rising interest rates, the property bubbles, being created by the hot money (especially the USD and YEN Carry Trades), in the emerging markets, will burst! Just like the 1997 Asian Financial Crisis.

Just a random thought. I apologize if it sounded incoherent.