12-05-2019, 01:02 AM
China issuing dollar bonds can be for multiple reasons. A common reason that sovereigns issue foreign currency bonds, aka borrowing in foreign currencies, is pure derivative speculation, hoping to profit in currency terms from movements in the foreign currency to domestic currency ratio. Perhaps China is making a huge bet on a dollar devaluation? After a dollar devaluation, they'd enter a currency swap agreement to exchange the dollars back out for a different currency and lock in the currency profit. Any way, point is that dollar borrowing doesn't mean China is relying on the dollar for any domestic operations in dollars. This kind of stuff is the bread-n-butter of derivatives speculation.
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