China forex diversification news hurts USD

Story link: China forex diversification news hurts USD

The US dollar suffered and sterling benefited after China said Wednesday that it will diversify its foreign-exchange reserves to favor stronger currencies over weaker currencies.

The announcement was made at a conference in Beijing where a vice director of China’s central bank said that the dollar “is losing its status as a world currency”, while an economist from the Chinese Academy of Social Sciences said that China would “inevitably reduce” its holdings in the US dollar as it is challenged by the euro and other currencies.

The vice chairman of the National People’s Congress, Cheng Siwei, also said that China will continue to set the exchange rate of its currency as it sees fit despite recent accusations from the United States and Europe that it is keeping its currency weak on purpose.

The news from China sent the greenback to another new low versus the euro, to a 58-year low against the Canadian dollar and to a 23-year low in relation to the Australian dollar.

The US dollar went as low as $1.4371 to the euro during New York trade before gaining back to $1.4349 to the euro at about 1:30 p.m. in New York.

The dollar was at $2.1045 in relation to sterling and traded at ¥112.9050 versus the yen, while one US dollar was worth A$1.0742 and one Canadian dollar was equal to $1.0887 US dollars.

Earlier on, the pound was worth $2.1047 US dollar at late afternoon in London on the news from China and ahead of the Bank of England’s next announcement on interest rates, due Thursday.

By early afternoon in New York trade, sterling was trading at 69.69p to the euro and at ¥237.6142 versus the yen.

The euro traded at ¥165.5977 versus the yen in New York.