Forex Blog: Currency Trading News & Analysis.

January 14th 2006

Correction: China may not diversify reserves

Last week, officials from China’s Central Bank announced that they would “actively explore more effective ways to utilize [forex] reserve assets.” Many analysts interpreted this remark as an explicit signal that China would begin ‘diversifying’ its foreign exchange reserves, by holding fewer USD and more of other currencies. However, as the speculation began to reach fever pitch, the same group of officials announced that their previous statement had been misinterpreted. In fact, existing USD reserves play a vital role in helping China maintain its peg to the USD. Accordingly, any ‘diversification’ will only affect new reserves. The Daily Times reports:

“The general trend is that every country wants to diversify its reserves. No one is willing to put all of their eggs in one basket and it is impossible for China to put all its forex reserves, which exceed $800 billion, in one currency.”

Read More: China unlikely to sell dollar reserves

SocialTwist Tell-a-Friend
Posted by Adam Kritzer | in Central Banks, Chinese Yuan (RMB), US Dollar | 1 Comment »

Sponsored Offers

FREE Daily Email Updates

Enter your email address:

Delivered by FeedBurner

One Review of “Correction: China may not diversify reserves”

  1. jl Says:

    Yes, there was the 01/06 SAFE announcement and then there was the 01/10 PBoC clarification.
    Were they signals that China would immediately unload its US-denominated assets? Probably Not.
    Were they signals that China will gradually diversify it fx reserves? Definitely Yes!

Have Questions? Want to Share Your Review?

Be heard. Please share your reviews today!

Neighboring Posts

© 2004 - 2018 Forex Blog.org. Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.