The Chinese stock market has all but collapsed the past several weeks, falling off nearly 25% in a six week span overall capped by a 6.7% drop yesterday. The causes for concern in the Forex world relate specifically to the Dollar.
As you might recall from several weeks ago, I spoke of the Chinese selling off some of their US treasuries and diverting that money to support their commodity purchases.
This tactic is proving to be detrimental to the short term stability of the Chinese economy as with the information on the stock exchange shows that industry is not moving which means the metals and durable goods they are buying are sitting in warehouses instead of feeding the economic machine.
For the Dollar this is a signal that could spell out a difficult Fall/Winter once again, as China commits more money to helping their own corporations and diverts more and more funds away from Treasuries.
Already, the US has held three Bond issue auctions in which the Chinese bought nothing – a fact that is not getting as much attention at this stage than it should. I would bet, since my blogs have been a few weeks ahead of the mainstream news, that this will become a bigger deal in the coming months as more auctions go by and China continues sitting on the sidelines