Miller Magazine Issue: 132 December 2020

89 MARKET ANALYSIS MILLER / december 2020 growing economies where monetary tightening may come sooner. Morgan Stanley believes that the dollar index will lose 4% in a year, emerging market currencies such as the Brazilian real, the South African rand and the Russian ruble may strengthen against the dollar, and the euro will trade at $ 1.25 by the end of next year. Chına "unexpectedly" poured $ 30 bıllıon ınto fınancıal system Official statistics show that economic recovery in China is in full swing, but a number of events ra- ise doubts about this. The above graph reflects the amount of liquidity that the Bank of China injects into the country's financial system throu- gh medium-term loans (in billions of yuan). On Monday, the Bank of Chi- na "unexpectedly" poured 200 billion yuan ($ 30 billion) into the country's financial system in the form of me- dium-term loans at an interest rate of 2.95%, Bloomberg writes, citing a statement from the regulator. In- terestingly, the news coincided with the publication in China of strong PMI figures for November, which exceeded both October and analyst forecasts. Recall that just two we- eks ago, the Bank of China changed its mind about tightening monetary policy and injected 800 billion yuan into the market, which more than co- vered the need of the country's credit institutions to finance the 600 billion bond repayment scheduled for November. The US and China are in a full-blown financial war. Therefore, Beijing will simu- late prosperity and manipulate macroeconomic statis- tics to attract foreign capital, Erik Peters, investment director at One River Asset Management, warned in October. It should also be recalled that in November, the yield on China's 10-year public debt reached a record high since May 2019. Bloomberg explains this by economic growth, which increases inflationary expectations, and the "metered" injections of liquidity, according to the agency, indicate Beijing's unwillingness to unduly relax monetary policy. China grain imports to rise higher China’s combined grain imports are forecast at a record level in 2020/21 driven by demand for feedstuffs. The upsurge has partially stimulated grain trade and elevated prices in the world market. China’s imports of coarse grains for 2020/21 (Oct-Sep) are forecast higher this month, mirroring the level seen in 2014/15 when imports spiked due to strong prices in the domestic market. The rise for 2020/21 is supported by strong recovery in the swine sector, which has been driving feed demand higher. Corn prices in the domestic market have rallied since February, and in October, the national price averaged around $362 per ton, the highest since August 2015. Greater imports are primarily driven by corn. The surge in corn imports is partly based on China Customs Statistics and U.S. Grain Inspections data through early November, which indicate that imports will far exceed the tariff-ra- te quota (TRQ) level of 7.2 million tons in calendar year 2020. There have been no public statements that would indicate that additional quota has been allocated by the National Development Reform Commission, the authority governing the TRQs. China wheat imports of 8.0 million tons in 2020/21 are forecast at their highest level in 25 years as State Trading Enterprises are helping bolster domestic stocks and taking advantage of competitively priced foreign supplies. The price spread between the average domestic price and im- port price was approximately $70 per ton in September, accounting for over one-fifth of the total domestic price. China is taking advantage of this arbitrage opportunity to help replace and rebuild aging government reserves. Mo- reover, the government’s domestic wheat procurements were down more than 13.5 million tons compared to last year, further incentivizing higher imports. USDA