For Forex reserves, China needs more Euros
In Beijing on Friday, the central bank deputy governor, Wu Xiaoling told the state media that China needed more Euros to support a bigger share of about 1.2 trillion dollars in foreign exchange reserves.
According to the China Securities Journal, Wu Xiaoling also stated that such a step has been decided upon by observing the steady growth in the European economy and the positive and stable standing of Euro in the Forex markets.Â
However, speaking at an economic forum in Brussels she clarified that this move of more Euros does not mean that the central bank is planning to trim down the share of the US dollars in its Forex reserves.
But the fact that there was no mention of the kind of resources which would be getting a lesser weighting now in the Forex reserves in consequence of the Euro being given a boosted weightage, was what kept marketers and traders wondering as to what assets would suffer a decrease.
The global markets are now strongly monitoring China’s euro dominated strategy for its Forex reserves, because any decision to purchase more euro-controlled resources is likely to put a considerable growing pressure on the European currency.Â
It has been supposed that China is at present being exposed to a fiscal loss due to a constant decline in the US Dollar. It is also being believed that currently about 70 percent of China’s resources are in US dollar goods which is thought to be the main reason for this probable loss exposure. Â
In July 2005, China had revalued its currency Yuan by 2.1 percent. And since then it has permitted it to grow an additional five percent.
As stated in a local newspaper, Wu Xiaoling was of the opinion that regardless of increasing pressure from trading partners, China would not speed up the tempo at which the Yuan is escalating.Â
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