Ok, Fair call there, Yes its exchangeable for oil. It does happen to trade at and around the 'market rate', depending on exactly how you define that, and the dynamics of it. But lets be clear, International trade, and countries reserves, are not strictly bound to USD and enforced across asset classes. So... Theirs a lot of different currencies that make up international trade, and theirs a lot of different currencies that make up foreign currency reserves... If an OIL company says they would prefer to sell oil for USD or any other particular currency, because they buy a lot of stuff from that location, No agreement, just happens to be done that way. Then that's fine, and that, I understand.
What countries do with their accumulated FX reserves also has a part to play in the USD trade dominance. Net excess FX reserves (ie a situation where a country sells more exports denominated in USD than it imports) need to be managed by CBs in a way that ensures domestic stability. In other words they need to be held in low risk, highly liquid asset classes. The US Treasury securities market (at $27 Trillion worldwide) provides this low risk, highly liquid environment. So the next time "Joe Six-pack" ponders the USD dominance in global trade as opposed to say using the Kina, point out that it's more to do with investing excess reserves in markets with low sovereign credit risk and high liquidity making it as easy as possible to exchange securities as opposed to the US planning $ dominance (though it works to their advantage).
I would still consider that any country producing a good internally in their country of origin, would calculate up the cost of all the inputs to create said product (in their own currency where the items manufactured, add their profit margins, and then, calculate a USD price based on the exchange rate, where... The price in their local currency is likely more stable, relevant, and for the short term, fixed. While to USD price listed varies as the USD exchange rate changes. It's not "really" a usd costed product. It's a converted quote and would come with a very quote expiration. No manufacturer is calculating usd on product inputs in a country where their manufacturing exposure is in another currency. So I kinda think that the relativity of "prices denominated in USD. Is equivalent to units of measure in imperial or metric. Sure.. product is made in metric... What's the point of listing it's imperial measurements.. the values going to by off by a small margin or spread at all times, and the actual situation is masked by ease of "a standard comparison figure... Just cos I got it at usd $x one time.. doesn't mean i can get it at that price again tomorrow... it's going depend on an exchange rate... Better to understand the imports are unit currency... and if you intend on buying more later without an exchange rate factor applied.. buy enough or the target countries currency in advance to minimise later risk of currency deviation. Or just read the usd price at the time... Whatever it ends up being... Dunno how you'd justify a project that requires a product at a future price subject to currency pair fluctuation though...
Though that is different to Central banks ensuring the relative value of the basket of currencies comprising their reserves remains above a particular value threshold. Completely different kettle of fish there and in that scenario. I guess it would be more of a governmental and central bank related issue than one that actually reaches the big manufacturing and corporates that operate on those countries. Those businesses are not spending the countries currency reserves when they import the inputs to their products. And they are not filling up the countries currency reserves when they sell their products internationally. Right?... Or is government intercepting trade comms and doing funnies with the numbers between buyers and sellers??? Pretty sure TLS isn't broken yet.
That's the futures market isn't it? Or you might enter into a forward contract to hedge in order to provide income certainty.
If I understand what you're saying, a CB like the RBA manages it's basket of FX reserves in order to reduce the risk of exposure to the vagaries of any one single currency and to ensure that it has enough liquidity to inject if required rather than in an effort to maintain a particular relative value above a threshold. For example if every Australian government and company were to cease dealing with China, then I imagine there would be no need for the RBA to hold Yuan. Because if no one needs Yuan then the RBA wouldn't have to intervene in the AUD/CNY market to manipulate the exchange rate of the AUD nor provide liquidity in the form of CNY to commercial banks on behalf of their customers. The way I understand it is that CBs buy, sell, swap, borrow or lend FX reserves in order to back their liabilities (currency issued, sovereign debt interest payable), manipulate the exchange rate if required and ensure liquidity in the banking system. As only governments and commercial banks have accounts at the RBA for example it therefore isn't an intermediary between buyers and sellers. Unless of course it involves say a foreign central bank or an entity that has an account with the RBA like a government or commercial bank where it will act in the same manner as banks do if I was to trade something with you. Corporations have accounts at commercial banks and deal with them when transacting in a foreign currency with other foreign corporations. Maybe some other members might be able to shed more light on the details @leo25 @Oddjob @pmbug ???
I chucked a couple of questions at ChatGPT. You may find the answers informative: 1. How does the RBA decide how much USD to keep as reserves? 2. What do corporations do with foreign exchange reserves? I won't copy and paste the responses, it's too long so I'd suggest visiting that site and asking those questions there.
Hey yeah, that's a good idea too, thanks. In that case, the only reason they might, is if, should Yuan still be traded with China by other countries; then to avoid a flood of money into the market dropping china's exchange rate (Respect: as Australia trade relationships would improve if other countries saw a cessation of trade with us under good terms without potential for negative impact in a removal of their currency from our basket in 1 fell swoop... where malice/problems aren't involved and good terms, then a responsible handling of a large reserve base would probably be appreciated), and/or as a value add to the general holdings (diversity of the basket of currencies), Yes. but as you pointed out, not for the actual utility of performing trade, so managing its balance would problibly also become simpler. I.E: they hold gold, but I don't think they exchange gold for anything anywhere directly... well. at least not to my knowledge. Yeah so the airport currency exchange kiosks need to be bought into the loop here or something because the physical cash trade for travelers there is ridiculous.
Spreads man, spreads aka "how can I maximise profit when I don't charge a commission"? Punters at airports are a captive market, whether it's FX exchange or a few beers.
Bibi is not happy either. Has decided to annex the West Bank to punish the Palestinians for the ICC decision . Yep, a true war crim.
not surprisingly Biden does not acknowledge this.l..cause he needs to sell more weapons to Bibi….Zelenskyy only can do ‘IOU’ to Biden…pay you later, bro….
Countries that are not members of the International Criminal Court (ICC) include: United States China India Russia Israel Saudi Arabia Iran Iraq Turkey Egypt Qatar Lebanon Sudan (which had notified the intent to withdraw after the ICC indicted former President Omar al-Bashir) Syria This list includes major global powers and influential regional states which have either not signed or not ratified the Rome Statute of the International Criminal Court. The reasons for non-membership vary from concerns about sovereignty, national security, to the perception of the ICC as biased or politically motivated, particularly against certain nations or leaders.
“So many people think that Trump's win means we’re ‘saved’ and that he’s going to rev up the economy and start paying down the national debt. But the reality is that he’s not a sound-money proponent,” Colombo told Kitco News. “His M.O. is to put pressure on the Fed to hold interest rates at ultra-low levels to juice asset prices and create a boom on his watch, as well as ramp up spending to make the economy appear to be booming.” TRUMP wouldnt do this.....
TRUMP's hired MUSK for DOGE, right...? MUSK will shed spending by 80%...just like X, and (cause US fed has no stock values) everything will look good on paper and no stakeholders to explain the spending cuts... all good for TRUMP.
