China Remarks Drive Dollar Lower
By CARTER DOUGHERTY
New York Times
Currency traders gave the dollar a thorough pounding today after a Chinese official suggested that the country could begin to diversify its huge foreign-exchange reserves.
The euro broke the $1.47 barrier before retreating a little and the pound climbed above $2.10, a value it had not reached 26 years ago. Other currencies also posted gains against the dollar.
Remarks by Cheng Siwei, vice chairman of the National People’s Congress in China — a colossal dollar investor by virtue of its $1.43 trillion in currency reserves, most of which are presumed to be denominated in dollars — helped drive the dollar lower.
“In terms of the structure of our foreign exchange reserves, we should take advantage of the appreciation of strong currencies to offset the depreciation of weak currencies,” Mr. Cheng said, according to Reuters.
While some viewed the statement as out of step with other officials, it highlighted the new power of state-controlled pools of cash to drive buying and selling. Russia and several Middle Eastern countries, flush from oil and natural gas sales, have similar sovereign wealth funds, and their appetite for assets not denominated in dollars appeared to be growing by the day.
It is probably an exaggeration, many analysts think, to say that the dollar is losing its status as the world’s leading currency, or that central banks like the one in China will actively dump dollars.
(Continued here.)
New York Times
Currency traders gave the dollar a thorough pounding today after a Chinese official suggested that the country could begin to diversify its huge foreign-exchange reserves.
The euro broke the $1.47 barrier before retreating a little and the pound climbed above $2.10, a value it had not reached 26 years ago. Other currencies also posted gains against the dollar.
Remarks by Cheng Siwei, vice chairman of the National People’s Congress in China — a colossal dollar investor by virtue of its $1.43 trillion in currency reserves, most of which are presumed to be denominated in dollars — helped drive the dollar lower.
“In terms of the structure of our foreign exchange reserves, we should take advantage of the appreciation of strong currencies to offset the depreciation of weak currencies,” Mr. Cheng said, according to Reuters.
While some viewed the statement as out of step with other officials, it highlighted the new power of state-controlled pools of cash to drive buying and selling. Russia and several Middle Eastern countries, flush from oil and natural gas sales, have similar sovereign wealth funds, and their appetite for assets not denominated in dollars appeared to be growing by the day.
It is probably an exaggeration, many analysts think, to say that the dollar is losing its status as the world’s leading currency, or that central banks like the one in China will actively dump dollars.
(Continued here.)
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