NZD/JPY May Fall as US-China Tensions Escalate Over Hong Kong
Most have thought that the Japanese Yen (NZD/JPY) may fall in early June to a more palatable level. As Japan faces a potential downgrade in its credit rating from agencies like Standard & Poor’s, Japanese lenders are worried about their own credibility. With the EU expecting major disruptions in China, the dollar may plummet as well.
The China-Japan Trade and Economic Cooperation Forum (JETEC) have entered into a new phase with the recent purchase of two Chinese submarines. This will allow for far more trade between the two countries. One could not have imagined just ten years ago that China would be so integrated into the world economy, trading with Japan as well as America and Europe.
For Japan, the America and European markets have become far more important. China’s rise will put the dollar in a precarious position. It is like a runaway train in a tunnel without an engine. If China continues on its current track, it could cause the collapse of the dollar and make a future trade war possible.
Today, the US Federal Reserve has bought bonds in an attempt to increase the power of the dollar. It could also destabilize the Euro. Even though the dollar is strong, there are other countries that trade with the US dollar as well.
There are signs that China is getting more involved in Asia, which gives us the U.S. to think of as the next major trading partner. The US has many trading partners that are not in the eurozone. The New Zealand Dollar is seen as a weaker alternative for the dollar.
Japan has traditionally had a more than “all-weather” relationship with the U.S. Though this relationship has frayed, things could get even worse in the future. Why?
China has been actively looking for allies in Asia, particularly in Asia, the United States, Canada and the UK. Other Asian nations like Malaysia, Singapore, Taiwan, India and the Philippines will be more open to Chinese trade, loans and investments as long as China respects their sovereignty. This is a bad sign for the United States. Of course, this has more to do with China’s desire to expand its market and influence in Asia.
The UK must realize that China and the US are in a world war for dominance. The US will win, and everyone else will lose. China does not want the US Dollar or the European common currency.
When the new president of Japan, Shinzo Abe visited Beijing he was welcomed by the Chinese President. Abe is now the leader of a great power. He had more to do with China’s anti-US rhetoric during his visit than anything else.
France is being watched very closely because it holds the EU and the USA hostage. The EU is the main competitor to the Chinese influence. A huge exit of US troops from Iraq is very dangerous. A French prime minister who is cozy with Obama will be seen as a major enemy.
The Prime Minister of Germany, Angela Merkel, does not speak for the German people. The future of Germany’s economy depends upon her. She has not spoken out enough against Obama.
The real danger to the dollar in the future is China and Japan together. They will join forces to change the world order. How can the dollar survive?