Six or eight months ago, the head of China’s central bank was giving angry press conferences talking about curtailing purchases of U.S. Treasury securities. Today a Chinese news site, Xinhuanet.com, reports that China’s buying of U.S. Treasuries is rising. In fact, the Chinese now love our bonds:
The March increase was the largest one-month gain on record. It surpassed the old record of a net increase of 135.8 billion dollars in May 2007.
They are probably impressed with the administration’s newfound fiscal discipline and the stern budget cuts being proposed by Congressional leaders. 
Oops. None of that has happened, or is likely to. So what’s up?
What’s up is the U.S. dollar! Suddenly fiscal discipline is immaterial. As the dollar goes higher against other currencies, the Chinese are making money on their investment.
Courtesy: Yahoo! Finance
Currency markets run on pure relative strength. A currency is only as good as the economy backing it-and even though those of us in the United States can see problems with our economy, from the outside it is clearly in better shape than most of our competitors. This is one reason why it may be a big mistake to be too parochial about your investment universe. The market is global even if your portfolio isn’t. It makes sense to widen your investment horizons, to look for returns wherever they are.
[...] “The market is global even if your portfolio isn’t.” (Systematic Relative Strength) [...]