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China to diversify its foreign reserves as stock prices drop
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U.S. Dollar Trading (USD) eased once again across the board before being relieved as sell off in global stock caused risk aversion to take its course. Many of the moves came during the Asian session as comments by a Chinese official stoked fears the central bank of the world’s fourth largest economy would reduce its holding of US assets, referring to the Euro as an alternative. So significant was the statement that it is perceived China is the second biggest holder of US treasuries, according to the US government. Dollar weakness was across the board pushing the greenback to all time lows against a basket of currencies. Concerns over the health of US economy, the possibility for lower lending rates and the sub-prime mortgage concerns add to negative sentiment over the US currency. Sharp sell of in stock prices did however relieve the dollar of further downside moves. In U.S. share prices, the NASDAQ was down -76.42 points (-2.70%) whilst the Dow Jones -360.92 points (-2.64%). Crude oil fell by US$2.00 retreating from an all time high of US$98.00 a barrel on profit taking. Oil closed at US$95.90. Looking ahead, Ben Bernanke is scheduled to speak informant of a joint, committee as markets await any indication of further rate cuts. The Euro (EUR) traded at a record high on Wednesday following the PBoC’s suggestion of diversifying its foreign reserves, Overall the EURUSD traded with a low of 1.4555 and a high of 1.4731 before closing the day at 1.4635 in the New York session. Thursday sees the ECB have a rate announcement although much of the market expects the central back to hold rates. TECHNICAL COMMENTARY
Euro 1.4660 Next Analysis:
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