Dollar Falls on Report China Considering Halting Treasury Purchases

© Reuters. – The dollar fell sharply higher against a basket of major currencies amid fears of a significant reduction in foreign dollar asset purchases after a report suggested China is considering reducing its US Treasury purchases.

The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.28% to 91.97.

Officials reviewing China’s foreign-exchange holdings reportedly recommended slowing or halting purchases of U.S. Treasuries, Bloomberg News reported, citing people familiar with the matter.

While it remains unclear whether the officials’ recommendation have been adopted, the greenback fell sharply amid expectations that a large chuck of foreign dollar demand would diminish as 50% of China’s $3.1 trillion foreign exchange reserves are in dollar assets, with Treasuries representing between 35% to 40% of the total.

Also weighing on the dollar was ongoing yen strength after the Bank of Japan’s recent decision to stoked investor expectations that the central bank is poised to rein in its ultra-accommodative monetary policy measures.

fell 1.06% to Y111.47, breaching its 200 daily moving average, to a one-month low.

fell 0.19% amid mixed economic data as faster-than-expected rise in November production was offset by a widening trade deficit.

rose 0.21% to $1.1961, while rose 0.39% to £0.8850.

rose 0.60% to C$1.2485 as rising oil prices failed to support a rebound in the loonie.

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