China’s Holdings Rose In November

Despite the slump in Asia’s reserves, China’s holdings rose in November of 2005. The Asian slump in foreign exchange reserves excluded China’s, who submits reports on a quarterly basis.

Analysts say Asia’s foreign exchange reserves could have increased if China’s holdings were included in the November report. China’s trade and current account surpluses were high last November and would have prompted the central bank to buy Dollars.

With last published reserves at $769 billion last September, China’s reserves would have boosted Asia’s reserves to $2.64 trillion. Asia’s foreign exchange reserves would have increased by $194 billion in 2005 due to China’s reserve increase at $159 billion in the first nine months of the year.

Analysts speculate that the surging reserves might prompt China to diversify some of its reserve holdings into gold, which have further driven gold prices to increase by 8% at $540.90 per ounce from $495.0 per ounce.

(Source: Asia Forex Reserves Fall In Nov As Funds Flee Malaysia, Daily Times Site Edition)

Forex Reserves Down In Malaysia

The foreign exchange reserves of Malaysia fell by $4 billion last November 2005 as many fled due to the disappointment over the appreciation of the country’s currency.

According to the Daily Times Website, investors were discouraged by a meager appreciation in the Ringgit, which only gained 0.6% since July 21 this year at 3.7785 per $1. The increase was a very short of investors’ expectations who have poured in funds in Malaysian bonds since 2004 since the Ringgit was anticipated to rise by 10% come 2005.

The drop in Malaysia’s reserves last November 2005 was the second in two straight months. This is then expected to last for another 2 months or so. Economists said that its effect would most likely be the same with short-term funds that will come due in the first quarter of 2006.

Due to this, Malaysia’s decline in foreign exchange reserves have affected Asia’s foreign exchange reserves causing it to fall for the third straight month as a whole by $2.2 billion to $1.87 trillion.

(Source: Asia Forex Reserves Fall In Nov As Funds Flee Malaysia, Daily Times Site Edition)

2005 A Good Year For The Dollar

According to Reuters.com, 2005 is a happy year for the US Dollar. Rallying at 13% against an index of currencies this year, the Dollar ends the year on a strong note after a three-year "bear run" between 2001 and 2004.

It has, in fact, "risen nearly 15% against the Yen and Euro this year" thereby bolstering its interest rate advantage. The Dollars 13% increase is its first gain in four years and its best performance since 1984. Its index also rose at the same 13% increase making it the best since 1997.

Factors that contributed to this increase includes the strong US consumer sentiment data, data on existing US home sales, and the high incidence of Dollar buying since the Christmas Holidays.
Despite these, investors remained hesitant to run any risk at the moment since the Dollar remained behind the Euro as data from Germany strengthened the latter, closing at $1.1844 with a 0.1% increase over the Dollar.

(Source: Dollar Holds Firm In Thin Trade Before US Data, Reuters.Com)