"On Friday, the Shanghai-based China Business News reported China had cut the size of its US Treasury bond holdings in its foreign exchange reserves to $180bn to avoid losses from a weakening US dollar.If the Chinese central bankers turn bearish on the dollar , this could be going down fast. A further report, at Fistful of Euros points to the possibility of the Russians beginning to switch from dollars into euros. In comments, it is pointed out that Russian foreign reserves aren't that immense - but then again, the trigger for the 1976 sterling crisis was the Nigerian central bank leaving the sterling area. That's the kicker about metastability - you only need an "it" to get the rush for the exits started.
"China has already begun reducing U.S. dollar assets in forex reserves," the newspaper quoted Yu Yongding, a researcher who is also a member of the central bank's monetary policy committee, as saying. This report has since been disputed, helping push the dollar higher.."
Friday, November 26, 2004
....I fear the end is coming soon. Well, enough Creedence Clearwater Revival. The dollar has taken another turn for the worse and this time it may be the real thing. I mentioned not so long ago that the huge accumulation of dollar central bank reserves since 1995 is beginning to look like a gigantic stock overhang, and if the BBC's report here is accurate, it may be about to be cleared.
Posted by Alex at 1:13 pm