Carry Trade Withdrawal Gives China Safe Opportunity to 'Talk' Tightening

Chinese stocks, commodities, and global markets, for that matter, are not correcting due to the anticipation of reduced demand from China, as a result of its squawking about tightening. In fact, last year's profitable trades are correcting because the U.S. dollar is climbing against the falling euro, and adding to that climb is short covering of the dollar as its carry trades of the last year are unwound.

With or without China's 'talk' of tightening – i.e. reining in credit, suspending new loans, raising the value of the yuan, raising its interest rates, and past hikes in its Required Reserve Ratio – China's stock markets would have corrected simply because carry trades tied to its market and commodities are being sold off.

What better opportunity, then, is there, than a technical global correction, to talk about the very thing, tightening, that is, which would bring about a correction in its own markets?

Read the whole article here.

Pierre Daillie (,, February 22, 2010.

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