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Montevideo, December 4th 2024 - 02:03 UTC

 

 

China’s concern over its Euro holdings tumbles the currency

Thursday, May 27th 2010 - 08:16 UTC
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The Dow Jones closed down below the 10.000 points The Dow Jones closed down below the 10.000 points

United States markets have put an end to what had been a day of stock market revivals around the world. After a day that had been mostly positive, New York's benchmark Dow Jones closed down 0.69% at 9974.45 - a four month low.

A fall in the Euro against the dollar was one trigger. That was sparked by a report in the Financial Times newspaper saying China was reviewing its holdings of Euro-denominated debt.

It said China was worried about the risk posed to Euro-based investments by the weaker countries in the 16-member bloc. The Euro traded at 1.218, a fall of 2 cents on the day.

Earlier, Europe's markets had all closed with good gains. The UK's FTSE 100 index finished up 1.97%, Germany's Dax index was 1.55% higher, while France's Cac 40 index ended with a rise of 3.22%.

Asian markets also finished their Wednesday trading sessions higher, in a general bounce-back from heavy losses realised on Tuesday.

The make-up of China's international holdings is a state secret. Although most of them are in US dollars, a significant proportion, estimated at 630 billion are thought to be held in Euros.

The Financial Times said representatives from China's State Administration of Foreign Exchange (SAFE) - which manages the reserves for the country's central bank - have held recent meetings with foreign bankers in Beijing to discuss the issue.

Although the report unsettled nerves again, analysts say it is unlikely China will act to sell some of these Euro assets, as that would only further depress the value of the remaining ones.

China faced the same problem when the US dollar was going through a bout of prolonged weakness against other currencies. (BBC).-

 

Categories: Economy, International.

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