Capital choosing liquidity

The US dollar index is breaking out through the next target of resistance this morning with the greenback advancing against every major currency including gold and silver.

Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.

As nervous capital continues to flow away from the many troubled economies in the Eurozone, this pattern is likely to continue for a while yet.

Bank deposits in Greece are clearly in fright and flight mode.

See: Europe’s economies:  A false dawn .

Even more telling, are the capital flows running for the exits in China, see Hot money heads for China’s exit:

“A hurried exit of capital from China is flashing a warning sign for investors in the world’s second-largest economy.

For the first time since the Asian financial crisis, China’s foreign exchange reserves shrank in the last three months of 2011. A $20.6 billion slip still leaves Beijing with a monumental $3.18 trillion in reserves—more than enough for a rainy day.

But a quarterly fall has not been seen since investors fled Asia in the 1998 financial crisis. It reflects a marked turn of sentiment on the Chinese economy.

A smaller trade surplus, combined with valuation adjustments resulting from a fall in the dollar value of the euro share of the reserves, explains part of the fall. But the most significant cause of the decline appears to be the flow of capital out of China.”