This should be an interesting exchange:
China Needs US Guarantees for Treasuries, Yu Says
by Belinda Cao and Judy Chen
Feb 11 (Bloomberg) — In talks with Clinton, China will ask for a guarantee that the U.S. will support the dollar’s exchange rate and make sure China’s dollar-denominated assets are safe,” said He in Beijing. “That would be one of the prerequisites for more purchases.
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Seems Paulson is still blocking foreign CBs from accumulating USD financial assets. This is a negative for the USD and a negative for US real terms of trade.
It does support US exports and reduces the need to add to domestic demand, even as US consumption remains low.
Yuan Rises Most in 3 Weeks After Paulson Calls for Appreciation
by Kim Kyoungwha and Belinda Cao
(Bloomberg) The yuan climbed by the most in three weeks after U.S. Treasury Secretary Henry Paulson urged China to let its currency appreciate to curb inflation and deter Congress from introducing trade penalties. Bonds gained.
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