Take a long hard look at this chart:
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The big story on Monday is the warning from the BIS that a resurgent dollar could disrupt EM markets due to the fact that collectively the region has three quarters of its $2.6tn debt denominated in the US currency.
Meanwhile, international banks’ cross-border loans to emerging market economies amounted to $3.1tn in mid-2014, mainly in US dollars, the BIS added.
And herein lies the key problem associated with the hypothetical eventuality of no more petrodollars. A major dollar squeeze in foreign eurodollar markets.
Not that the petrodollar is near its death just yet — the US after all is nowhere near energy independent. Read more
We’ve written a lot about capital outflows from China, what Beijing is doing to try to stem the flows, and how all this impacts the renminbi. Most of the time, the talk is about billions of dollars whizzing around the financial markets, one way or other. Yet, it seems that China’s capital outflow is accelerating even in its simplest form — yes, we mean bundles of cash hidden in suitcases.
It’s seriously old school, and seems almost quaint, but the sums are sizeable. Read more
From Bloomberg on Monday (citing Morgan Stanley research):
Morgan Stanley says the potential scarcity of dollars among foreign private borrowers represents the U.S.’s net position with lenders abroad of minus $2.4 trillion, adding $4.8 trillion of U.S. financial assets held by central banks, and subtracting $500 billion of foreign official assets held by the U.S. Read more