The beginning of a massive reserve unwind
By Christine Hughes, Canada. Chief Investment Strategist, OtterWood Capital:
China’s actions to stabilizing its currency have hit their reserves to the tune of $93.9 billion in August alone! The pressure from the August 11th devaluation has resulted in the first official reserve reduction in China since it joined the World Trade Organization in 2001.
As the chart below shows China’s reserves have fallen over $500 billion in the past year (with August being a record month). So far it’s been a dramatic reduction and it’s only early September. I believe this is the beginning of a massive reserve unwind and it will continue to be a dramatic year.
By Christine Hughes, OtterWood Capital
Years of a global dollar-denominated borrowing binge has raised the risks of an Emerging-Market debt crisis, an epic USD short squeeze, and many big losers. Read… Fear the Strength of the US Dollar