China quietly propping up EURO?

Discussion in 'Economics' started by Grandluxe, May 9, 2012.

  1. May 9, 2012, 3:00 p.m. EDT

    NEW YORK (MarketWatch) — To volatility-loving currency traders, the euro has been a source of great frustration, its trade versus the dollar hewing to a boring range of 4 cents for almost four months.

    Central-bank policies explain why buyers frequently emerged whenever the euro dipped below $1.30 in February, March and April. And they’re preventing it from collapsing more rapidly now that it has finally broken below that level and has reached its weakest point since Jan. 25.

    Evidence suggests that Chinese state institutions are effectively intervening to manipulate the euro exchange rate, perhaps to offset the competitiveness that the country’s exporters have lost to the dollar now that the yuan has appreciated.

    Over the previous three months, traders referred so frequently to buy orders by a “large Asian central bank” that it became conventional wisdom that China was deliberately stopping the currency from falling below $1.30.