Tags: russia | china | dollars

Russia, China Buy Dollars, Despite Trash Talk

By Dan Weil   |   Thursday, 11 Jun 2009 10:17 AM

Recent talk from Russian and Chinese officials showing wariness about their huge dollar holdings and suggesting an alternative reserve currency has roiled financial markets.

But while the Russians and Chinese are walking the walk, they aren’t talking the talk.

Brazil, Russia, India and China (BRIC, as Goldman Sachs termed them) went on the biggest dollar-buying binge in eight months during May, adding $60 billion to their reserves. That’s according to data compiled by central banks and strategists, cited by Bloomberg.

Brazilian officials have trashed the dollar just like the Chinese and Russians.

So why the hypocrisy?

First, these nations are protecting their exports. A stronger dollar makes their goods cheaper in dollar terms, boosting the exports.

Second, the BRICs already have huge reserves of dollars, so a drop by the dollar would devalue their own holdings. The more they sell dollars, the less their remaining dollars will be worth.

And finally, big dollar sales by the BRICs could exacerbate the global financial crisis.

“It would be shooting yourself in the foot to sell U.S. assets and move away from dollars too quickly,” Mitul Kotecha, Calyon’s head foreign exchange strategist, tells Bloomberg.

“As much as we are seeing in terms of rhetoric, the central banks have so much exposure they will be very careful.”

Most experts agree that the dollar isn’t going anywhere. "I think the dollar is the dominant currency for a while to come,” hedge fund legend George Soros told CNBC.

© 2017 Newsmax. All rights reserved.

1Like our page
2Share
StreetTalk
Recent talk from Russian and Chinese officials showing wariness about their huge dollar holdings and suggesting an alternative reserve currency has roiled financial markets.But while the Russians and Chinese are walking the walk, they aren’t talking the talk.Brazil, Russia,...
russia,china,dollars
242
2009-17-11
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved