How do those big Chinese institutions deal with the Euro/USD trade?
First, through currency exchange trading just as our group does.
Secondly, there are lots of RMB in Europe so there needs to be a buffer to keep the value of RMB vs. Euro constant just as in the US dollar traded equities, e.g. OIL as everyone can see today from the rise in oil exactly consistent with the decline in the US$.
But how do US equities and dollar-traded commodities rise from the Euro rise at the exact same rate?
Because institutions, super-computer-assisted, can use a rise in the Euro/US$ to effectively "repatriate" the US$ they have risked in the Euro Zone. The Euro can be directly sold at a relatively high price that produces more US$ because of the exchange ratio - or - through the use of derivatives like puts, calls, futures, etc. And the US$ need to go somewhere immediately (in a nanosecond or so) and they go into US equities. There is no place else today.
Could there be any other reason for BAC day-trading to exactly copy semi trading?? Probably not. Banks and semiconductors, no real relation except the algorithms.
None of us believe what CNBC is paid to tell us, right?
