Dollar has hit bottom, Big China says \r\n\r\n\r\nAn investment strategist at China''s $300-billion (U.S.) wealth fund said the world''s third-largest economy now had a say in the exchange rate of the U.S. dollar, which it expects to rise while the yen should fall further.\r\n\r\nThe comments by Peng Junming, who works in the asset allocation and strategic research department at China Investment Corp, triggered a rally in the U.S. dollar.\r\n\r\n“I think the dollar is at its bottom now. There will be very limited space for the dollar to drop further,” he told an academic forum. “The yen is what, I think, has the worst outlook. The yen will continue to drop, unlike the dollar, which will not serve for long as a source of funding carry trades.”\r\n\r\n\r\nThe market reaction to Mr. Peng''s comments shows the sensitivity to clues on how China and its state fund view the markets.\r\n\r\n“A U.S. government official recently said that the dollar is ours but the problem is China''s. But China now has a voice in influencing the dollar''s exchange rate and the interest rate on U.S. government debt,” Mr. Peng said.\r\n\r\n“Although the dollar belongs to the U.S., China has a role to play in determining the dollar''s exchange rate.”\r\n\r\n\r\n\r\n\r\nNo Need for Gold \r\n\r\n\r\nMr. Peng noted that China''s stash of dollars enabled it to influence commodities markets. Commodities like oil are priced in dollars and the prices tend to move inversely to the dollar.\r\n\r\n“We can weigh down or push up the dollar exchange rate, which will have an impact on the global commodity futures market.”\r\n\r\nMr. Peng was explicit in his view on gold: “China should have the right attitude about investing in gold. There is no urgent need for China to increase gold buying for now, because prices are high.”\r\n\r\nHe defended U.S. Treasury investments, arguing they had offset losses in stocks and helped swell currency reserves in 2007 and 2008.\r\n\r\nAbout two-thirds of China''s reserves, the largest stockpile in the world at $2.27-trillion, are estimated to be invested in dollar assets.\r\n\r\nLou Jiwei, CIC''s chairman, has been careful not to say much about how the fund invests its money. In October 2009, he said the fund was putting more money into commodities, real estate and infrastructure to hedge against medium- and long-term inflation and a fall in big currencies.\r\n\r\nMansoor Mohi-uddin, currency strategist at UBS in Singapore, said sovereign wealth funds are returning to prominence after losing influence during the financial crisis.\r\n\r\nHowever, private sector U.S. portfolio managers have the ultimate say on the dollar, he noted.\r\n\r\n“The portfolios of both sovereign wealth funds and central banks globally remain dwarfed by U.S. asset managers. It is the latter, as the largest holders of dollars in the world, who will continue to determine the ultimate direction of the greenback,” he said note to clients.\r\n\r\nTurning to interest rates, Mr. Peng, who previously worked in the New York office of the Chinese central bank, said he expected that both the United States and China would raise rates in the second half of the year.\r\n\r\nChina Investment Corp. was set up in late 2007 with $200-billion hived off from the foreign exchange stockpile, with a mandate of seeking higher returns than the more cautious reserve management agency.\r\n\r\nThanks largely to investments in domestic banks, its assets under management reached $300-billion at the end of 2008.\r\n\r\nChinese media have reported that CIC might be in line to receive as much as $200-billion extra from the foreign currency pot.\r\n\r\n\r\n\r\nreport on business - by THE GLOBE AND MAIL NEWS.com\r\n\r\n\r\nSource: http://bigcapital.wordpress.com\r\n\r\n\r\n\r\n…………………….\r\n\r\n\r\n\r\n\r\n\r\n.\r\n\r\n\r\n\r\n\r\n\r\n\r\n.