Source:
Wall Street JournalBEIJING -(Dow Jones)- China's chief banking regulator on Sunday sharply criticized loose U.S. monetary policy, including the weak U.S. dollar, saying the situation is creating massive speculation in global asset markets.
The U.S. Federal Reserve's promise to keep U.S. interest rates at extraordinarily low levels for an extended period "has already led to a massive U.S. dollar carry trade and massive speculation," Liu Mingkang said at the International Finance Forum in Beijing, which began just hours before U.S. President Barack Obama was scheduled to land in China on his first ever visit.
Even as key trading partners like the U.S. and the EU and multilateral agencies like the World Bank and International Monetary Fund recommend more yuan appreciation, China - as the world's biggest holder of U.S. Treasurys - continues to push back, defending its own exchange rate policy, while warning about unsustainable U.S. economic policies.
Liu said that the weak U.S. dollar and low U.S. interest rates are creating "unavoidable risks for the recovery of the global economy, especially emerging economies" and that the situation is "seriously impacting global asset prices and encouraging speculation in stock and property markets."
The focus on the greenback has come after it sunk to a 15-month low last week. In a speech late Tuesday, Federal Reserve Bank of Dallas President Richard Fisher said he is aware that the Fed's current stance of keeping interest rates low for an "extended period" was denting the dollar.
Fischer's comments mark the first mention from the Fed on the so-called carry trade, which takes advantage of cheap dollar borrowing costs tied to the central bank's current zero-percent interest rate stance.
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I truly wish that Obama would cleanse his economic advisory department of all of the know-nothings and get GS away from our Treasury