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China to Limit Foreign Economic Activity – Fear Rules

Chinese news agencies report that the policymakers decided to limit the activity of foreign investors through severe laws – foreigners won’t be able to buy except offices for personal use. Reports about this limit and more are sending the Shanghai stock exchange 5% lower and rocking the whole world – “safe haven” currencies rise as fear grows.

The Euro, Pound and Aussie are falling while the dollar and the yen are on the rise.

According to the reports, foreigners who are permanent residents in China will be limited to owning only one house -the one they live in. This harsh step might address the housing bubble in China. The limits on buying only offices limits not only excessive prices in the real estate market, but also any ability to act in China.

Together with an upcoming rate hike in China (to curb inflation), there are fears that Chinese growth is all but over. The Shanghai stock exchange fell by 5%, European  stock  markets fall by 2% and the impact on currencies is strong as well.

AUD/USD plunged over 150 pips, and is far from parity, on the downside. EUR/USD, also suffering from the Irish crisis, is at the lowest level in 5 weeks, USD/CAD jumped, and GBP/USD is trading lower.

Except the US dollar, also the Japanese yen is enjoying its safe haven status. After rising for a few days, USD/JPY fell under 82 on these news.

Risk aversion at its best.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.