South Korean Ministry of Finance, Planning Executive, Yoon Jeung-hyun 22 in the Group of Twenty (G20) finance ministers and central bank governors said at the opening session, in view of the importance of the exchange rate issue, the meeting agenda of the first day of change, to focus on discussing exchange rates.

After difficult negotiations, G20 finally 24 members of the “Joint Communique” commitment to a more market-determined exchange rate policies reflect economic fundamentals, excessive and disorderly exchange rate fluctuations reduced the negative effects, avoid competition devaluation measures.

G20 to see how the world is consuming and producing countries in the re-balance between the number of speakers, the results did not surprise the market, said the results should be fairly obvious. In the early stage of research and G2 encounters, the ultimate market to see with a certain binding between consumer and producer of the moderate compromise agreement, and a new national currency with the developed countries to share the power of cooperation between the ceremony rehearsal.

Producers said they did not take the initiative to once again pursue trade surplus. Geithner told the meeting proposed that the United States, the economies current account surplus or deficit should be limited to less than 4% of GDP, the exchange rate to ease the dispute, the balance of international trade. Prior to the Chinese central bank vice governor Yi Gang also said that the Chinese government will in the current account surplus in the GDP ratio of below 4%. 2009, the peak rate from 10.6% in 2007 to 6%, last reached the level of less than 4% in 2004. Although still not clear how to achieve, but this is a clear signal. There’s some kind of understanding which may indicate the parties want to avoid further increase in the exchange rate on the tone;

The meeting also urged the reserves of countries (United States) must take action to control currency printing behavior, Geithner also began to publish a “strong dollar” rhetoric. Obviously the Fed might take a new round of quantitative easing, is leading to the “strong dollar” the biggest obstacle on the road. Although not see Bernanke’s position, taking into account the attitude of compromise, in November will be the order of arrival may be smaller than expected (less than 500 billion scale), may also take the form of small step forward in stages, for example, the first 1000 million. In any case, both short-term external balance adjustment gain valuable time, need to speed up the process and the internal restructuring efforts.

Between emerging and developed countries, the assignment of monetary powers – the Group of Twenty agreed to more than 6% of the words is transferred to emerging economies. European Commission will give up two seats; may need a year or so of time to decide which smaller European countries to give up seats. IMF Committee will meet next few weeks to approve the decision. China’s share is expected to increase from 6 to 3, and ranks among the United States and Japan. Russia, India and Brazil are also expected to rise 2-3. China, India, Brazil and Russia in the IMF’s voice has been among the top ten. But they may not expect the short term more in the future more orderly international monetary system is still waiting for the long side to Japan, the adjustment should be carried out in 2013. The United States opposes any form of rotation system, the U.S. veto is still able to shake. Bluntly, the United States did not lose the basic, benefit China, Europe, Japan and South Korea have some down, and the global economy, ecology or the law of the jungle, the United States lost a carrot to the Chinese, certainly behind the argument.

On this basis, countries promised to temporarily give up the exchange rate war, culminating in the “Joint Communique” commitment to a more market-determined exchange rate policies reflect economic fundamentals, excessive and disorderly exchange rate fluctuations reduced the negative effects, avoid measures taken to competitive devaluations. This set the tone for the Seoul summit. The long term, we believe that, if indeed by market forces determine the exchange rate, then the consumer weaken the currency and the currency strengthened producers (resource is accompanied by a stronger currency) is the only right and proper thing, but consumers now refuse to give up Monetary hegemony, producers would not only host the standoff.

Impact on the market: the market viewed with suspicion by the truce. Because we all know that a populist in power in the world, domestic pressures and interests are always first. There may be new hope that tangled summit will follow the basic circuit diagram provided in advance now, if the international final reason prevail. Consumer can expect the dollar index currency may rise in short-term return channel, waiting for early November quantitative easing is expected to achieve; production currencies such as yen, Korean won will be part of the lifting of the intervention, but the exchange rate will not result in a significant increase in cases; expect the yuan to will continue to run in the rising channel, to the end, the appreciation rate will reach around 3% annual appreciation rate of 5%; resource currencies like the Australian dollar Canadian dollar’s strength will be to continue to rest, the bulk product prices as well. Global liquidity will temporarily lose a clear direction for betting. Markets are waiting for early November in the stalemate in the clear attitude of the United States.

Market-led follow-up dollar

This week the market was in a weak, weak quarterly stocks the main feature is good Fanzao sell into. In a strong market, good performance if the stocks, notice the day increases the probability that the larger, and the recent release of positive results announcements are frequently sold individual stocks. By the State Council, the central bank both early warning of future inflation pressures are still greater stimulation, coal, nonferrous metals and other varieties of inflation was Bad. However, due to the quantitative easing policy of the new round of Fed efforts to lower than expected drag down commodity markets, resources, continuing active plate is obviously inadequate.

This week the trend of the market is rational, because the market’s Going round the catalyst is brought about by the depreciation of U.S. dollar liquidity flooding expected. But the dollar’s recent rebound of the situation are beginning to have bottomed, it dare not act rashly mainstream funds, making the bank stocks, brokerage stocks, coal stocks, and other mainstream varieties of non-ferrous metal stocks sharply higher overall is unlikely to emerge. Therefore, just as calcium deficiency on the Shanghai Composite Index, as soft down trend. However, early intervention, additional funds have tasted the sweetness of the stock rose after the obviously difficult to completely withdraw from the market. Therefore, the remaining funds in line with public opinion began to focus on the main line of investment environment, it reflects from one side and more funds to launch a stock short is still a very strong energy prices. In this lead, tungsten, fluorescent and other related mining sector is rapidly gaining market resonance, or table in the forefront.

The trend of the market outlook for the dollar, as long as the market for further follow-up to the Fed’s policy of quantitative easing is not expected to change, then the weak U.S. dollar medium-term patterns die hard. The dollar index short-term movements in the Nov. 2 ~ 3 at the Federal Reserve monetary conference after the resolution has a clear point. In the medium term trend, due to adopt expansionary U.S. monetary policy, the major trend of the falling dollar does not change, only short-term behavior of the current oscillation, the oscillation of the market index at the upstream end of the year more likely, the excess revenue opportunities may lie in the weight cycle stocks.

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