China The Supreme Power Behind The Foreign Exchange Market Movement!!!!!

By reviewing the FX major movement took place in the year of 2006, one conclusion can be drawled, China is the power engine who created the momentum, provided the beyond average volatility in FOREX market. A conventional example can be seen from the year long US dollar weakness against major European currencies. Here come three questions, first of all, why china has the tremendous influence in the FOREX market? and second, what move(s) are expecting from China in the year of 2007 and how will these move(s) impact the FOREX market? The Red Power (Banking Effect, Allocation Effect)As mentioned briefly in the paragraph above, China provided a comprehensive FOREX market direction in the past year. From Chinese Yuan revaluation to Chinese Foreign Reserve restructure project (from solely against USD to against basket of major and minor floating currencies), decisively created the path of the US dollar general movement. All these events indicated that China has gradually reduced its US debt purchase; thus, the demand of the US dollar has been significantly decreased since China started putting alternative “goods” into its global shopping cart. From the prospect of global money supply/ “cash flow”, hefty foreign investment funds have flooded into Chinese and other fast growing merging markets (INFLOW), while China deliberates reaching the solution of Foreign Exchange (Risk) diversification by increasing the flexibility of its currency, RMB which result the slower outflow to the United States and speedier outflow to European countries and other Asian countries.