[lbo-talk] Free Fall

[Tom Walker]

I hate to do this because it'll just inspire a correction but when I 
checked the forex markets a few minutes ago the Euro was over 1.33, the 
Loonie was at 85 cents (yippee!) and the dollar was only buying 102.25 
yen. Then I spied this little item. Now to sustain the US current 
account deficit, China needs to be _buying_ dollar assets, right? Well, 
would you?

China cutting dollar assets in forex stash -paper
Fri Nov 26, 2004 12:50 AM ET
BEIJING, Nov 26 (Reuters) - China has been cutting dollar assets in its 
foreign exchange reserves to avoid losses stemming from the weakening of 
the U.S. currency, the China Business News said on Friday.

"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.

Growth in China's holdings of U.S. treasuries had slowed this year, and 
it now held about $180 billion worth, Yu was quoted as telling a forum 
in Shanghai on Thursday.

Dollar-denominated assets made up some 80 percent of China's foreign 
exchange reserves, the newspaper quoted an unidentified source as saying.

"Of that, a large majority was used to buy U.S. treasuries, and so the 
fall of the dollar has brought a loss of value in forex reserves," said 
the newspaper, which started up just last week in China's financial hub.

China has closely guarded the makeup of its foreign exchange reserves, 
which hit nearly $514.5 billion at the end of September and are the 
world's second-largest, after Japan's.