- December 1, 2010: Vol. 2, Number 11

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Parting Ways: Will Decoupling Help Reduce Risk in Your Portfolio?

by Alex Eidlin

In late October, Chinese authorities raised deposit and lending interest rates for the first time since the global financial crisis. The surprise policy move increased the one-year lending rate by 25 basis points to 5.56 percent from 5.31 percent and the one-year deposit rate to 2.5 percent from 2.25 percent.

At about the same time, the U.S. Federal Reserve Board reiterated its readiness to continue its quantitative easing, a policy aimed at lowering borrowing rates and providing even more liquidity to financial institutions in order to stimulate lending to the U.S. economy, which refuses to show signs of any meaningful recovery.

Although officially the world’s largest economy ended recession about 17 months ago, the U.S. recovery is losing momentum, with factory orders falling and unemployment forecast to increase further. Concurrently with this weakness, emerging economies are showing more strength. Manufacturing in China has been accelerating in recent months, and

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