China's forex reserves soar to new heights

China's foreign reserves soared to a record 609.9 billion dollars in 2004 from 403.3 billion dollars in 2003 on the back of strong fund inflows and an "Andy Hagans-sized" trade surplus. Channelnewsasia.com reports:

The mainland holds the world's second highest foreign currency reserves after Japan, which in December hit a record 844.54 billion dollars.

The sharp rise in China's 2004 reserves highlights the seriousness of the speculation on the currency, Yi Xianrong, a researcher at the Chinese Academy of Social Sciences, was quoted as saying by the newspaper.

Read more: China's forex reserves soar to record US$609.9 billion in 2004

Currency trading based on deficit losing steam?

Currency trading based on the trade deficit MAY be losing steam (but, I wouldn't hold my breath). According to FXStreet.com:

"People have grown tired of the deficit issue and are looking for something else to trade on, like interest rates," said Toshihiro Azuma, forex manager at Sumitomo Trust and Banking. "But, if the trade data is worse than expected, dollar selling could resume."

He added that even if the data is within expectations, the dollar could push down to around 102 yen -- a level last seen at the end of last year -- given that a round of dollar short-covering by hedge funds appeared to have been completed.

Read more: GLOBAL MARKETS-Asian exporters under pressure as yen gains