WASHINGTON – The dollar came under fresh selling pressure on Thursday evenafter China hit back over a “fake news” report that it could slow or haltpurchases of US Treasuries.
The greenback dived Wednesday against most rivals as Bloomberg Newsreportedlink>thatChinese authorities reviewing foreign-exchange holdings had recommended themove.
Initially fruitful, the dollar’s attempts to recoup the previous day’slosses fizzled out by the European mid-afternoon, with the greenback loweragainst the euro, the yen and sterling.
Earlier, China’s State Administration of Foreign Exchange deniedthe Bloomberg report, saying in a statement: “We think this story could bequoting a mistaken source or it could also be a piece of fake news.” Thereport however briefly sparked fears on Wednesday that a huge amount offoreign demand for dollars would dry up.
“’China has reduced their purchase of US treasuries was the news whichcrashed the prices of the US Treasuries and pushed the dollar index loweryesterday,” noted analyst Naeem Aslam at trading firm ThinkMarkets.
“But the Chinese officials clearly labelled this as fake news and assuredmarkets that China is only diversifying its options.”
China has long invested heavily in US bonds as a way of controlling thevalue of its own yuan currency and Bloomberg News estimates it currentlyholds around $1.2 trillion in Treasuries, double what it owned 10 years ago.
“We do know that China is the largest buyer of the US Treasuries, and ifthere is any reduction in the Chinese appetite for the US Treasuries, itwould have serious consequences for the global markets,” cautioned Aslam.
Elsewhere on Thursday, London briefly touched another record high despiteretail gloom as mining and utilities stocks rose.
The retail sector was hit by underwhelming Christmas trading updates fromsupermarket giant Tesco and clothing-to-food chain Marks & Spencer.
“Retail stocks in the UK have been smashed,” noted Manulife AssetManagement equities analyst Will Hamlyn.
“They are so out of favour at the moment partly due to Brexit, partly dueto the weak Christmas season (and) partly due to expected share losses toonline” competition.
Eurozone stock markets, having opened steady, slipped as the session woreon.
Shares in AirFrance slumped 2.9 per cent after Italian media reports itwould ally with low-cost easyJet to take over Alitalia.
Shares in the British low-cost carrier meanwile jumped 3.9pc.
US stocks resumed their upward climb, with the Dow striking another recordhigh, after a pullback in the prior session. Shares in airlines and energycompanies were among the early winners.
The Dow was 0.4pc higher in late morning trading.