17 September 2007

China's central bank raises interest rates

China's central bank has raised interest rates by 27 basis points.

As I have mentioned earlier, food prices are skyrocketing there, but the higher interest rates available in china is one more factor in making the dollar less attractive.

The dollar may float downward for a bit, but given the nature of currency markets, eventually, it will crash, and probably overshoot it's normal equilibrium price, and rising Chinese interest rates, and falling US interest rates within a few days of each other is a double whammy that the dollar can ill afford.

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