Global Investing

The growing acrimony in the international debate over China's currency policy has led some to warn that Beijing could dig in its heels if pushed to hard to let its yuan rise.

But Barclays Capital says Beijing could let its currency strengthen as early as next month, notwithstanding its public resolve against Washington's threat to label it as a currency manipulator.

"They do have a 'If you stop pushing, we'll do it' attitude, which is kind of childish, really. But it will happen because they are the only country in the world, besides India, where there is a whiff of inflation," says Barclays' asset allocation head Tim Bond.

"It's in their own interest. It's the right thing to do."

Barclays expects the relaxation of China's de facto dollar peg to result in the equivalent of a five percent annual appreciation over the next year.

Investors should also keep the heightened rhetoric among U.S. lawmakers in perspective, Bond says.

Oxford SWF Project, a university think tank on sovereign wealth funds, is looking at reports that the latest entry in the field could be Scotland. The project has a new post about the Scottish government floating the idea of an oil stabilisation fund to use oil and gas revenues.  It cites Scottish cabinet secretary for finance John Swinney looking abroad gleefully:

“We want to harness the benefit of oil revenues now for future years. An oil fund can provide greater stability, protect our economy and support the transition to a low carbon economy. Norway’s oil fund is worth over £200 billion – despite the first instalment being made as recently as the mid 1990s – and Alaska’s oil fund even gives money back to its citizens every year.”

The SWF project reckons the idea is a good one, but wonders if something other than meets the eye is at play. It had two questions.

The Austrian government debt agency’s two-year old foray into subprime investments has turned into a political hot potato and sparked an increasingly heated debate between the Social Democrats and conservatives, caught in an uneasy but coalition government without viable alternative.

Austria’s audit court last week revealed that the agency, which in its staid day job issues government bonds and makes sure state coffers are full when they need to be, started to moonlight on money markets in 2002 to earn a little extra money on the side.

Its cash position ballooned from an average 4.5 billion euros in 2002 to a peak of 26.8 billion euros in October 2007. This level “was not only determined by economic necessities, but was also meant to generate additional revenues,” the audit court said in its report.

MacroScope is pleased to post the following from guest blogger Julian Chillingworth. Chillingworth is chief investment officer of UK investor Rathbones. He questions here whether Britain will face a second downturn shortly after struggling out of recession.

Are we likely to witness a two-tier recession in the UK?  Perhaps not a recession but certainly a secondary downturn. A vast number of people have enjoyed lower mortgage payments and a level of job security, but will this last?

The UK is in somewhat of a unique position in so far as it faces a regime change, with some obvious ramifications for policy.  However, whoever takes the seat (most likely the Tories) must still cut back public expenditure and raise taxation, both within the context of high unemployment.

I once paid a cop 30 ringgit (about $10 then) for making an apparently illegal left-hand turn in Kuala Lumpur. Scores of drivers in front of me were also handing over their "instant fines", discreetly enclosed within the policeman's ticketing folder. It was days ahead of a major holiday and the cops were collecting their holiday bonus from the public.

Malaysia opposition leader Anwar Ibrahim holds a disc he says contains evidence of judge-fixing in Malaysia 

I felt bad about this, of course. What I was doing was illegal, immoral and perpetuating an insidious culture that goes by many names in the East -- "baksheesh" in India, "Ali Baba" (and his 40 thieves) in Malaysia, "swap" in Indonesia (means "to feed").  But the policeman pointed out I would have to take off the good part of a day to go to court and pay 10 times as much to the judge. So I rationalised: "When in Rome..."