Similar to the decision to open swap lines between the Australian and Chinese central banks in CNY, the recent announcement that the Reserve Bank of Australia will diversify 5% of its holdings into Chinese government bonds makes good political and (in terms of encouraging trade) business sense.
But are they a valuable instrument? In terms of currency value, the Chinese currency RMB would appear to most likely to appreciate (taking stated information about fundamentals as given). But the likelihood that there will be a decent return from the Chinese government?
Don't bank on it. It is a reflection of the broader alignment of the Australian economy too - and looking at the recent headlines doesn't make good reading:
But are they a valuable instrument? In terms of currency value, the Chinese currency RMB would appear to most likely to appreciate (taking stated information about fundamentals as given). But the likelihood that there will be a decent return from the Chinese government?
Don't bank on it. It is a reflection of the broader alignment of the Australian economy too - and looking at the recent headlines doesn't make good reading:
The economic weakness in China clearly appears to be taking a toll on the Aussie economy.... (here)
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