a couple of reactions to Nathan's post
a) in the first transaction, it describes what happens in the FX market if Chinese resident wants to buy fx from a US resident. At the end of the transaction, the U.S. resident has CNY, the Chinese resident USD
in conventional macro/ in the "dealer flow" literature, the increased demand for dollar (deposits) from Chinese residents would induce a change in the XR.
the US resident already had all the CNY they want
so then you have an increase in both countries gross positions -- with the NIIP influenced by the relative movement of the CNY (on the US deposit) and US stocks (for the Chinese resident).
for the current account one of the parties needs to sell to an exporter/ importer
then the US resident ends up with a new dollar deposit (and no CNY)
symmetric financial flows is one outcome but not the only outcome --
this is Stephen Roach to my ears
"its import spending growth in the United States outpacing import spending growth in these countries which drives the gap between them" -
(Bernanke noted that if this was the case US rates should be high not lowish .. but set that aside)
in a strong version of that fx intervention by a central bank has no impact on the XR ...
my two cents