April 17, 2006
News Press
TOKYO (AP) - The dollar fell against the euro and yen in Asia Monday on a media report suggesting that China might reduce its purchases of U.S. Treasuries, and amid speculation that U.S. interest rates may have peaked.
The U.S. dollar fell as low as 118 yen at one point before trading at 118.28 yen in Tokyo midafternoon, down 0.36 yen from late Friday in New York. The euro rose to $1.2178 from $1.2108.
Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress, was quoted in a Chinese state-owned newspaper Monday as saying that China should cut the amount of U.S. Treasury bonds it buys.
He said China should channel the money into buying more U.S. goods, which would cut its politically sensitive trade surplus, the China Securities Journal reported. Cheng made a similar remark earlier this month to a Hong Kong newspaper, prompting the central bank to say his comments didn't reflect its official position.
China has $875.1 billion in foreign currency reserves, much of that money invested in U.S. Treasuries. Reducing those purchases could undermine the dollar.
Sentiment toward the dollar also took a hit after an article in The Wall Street Journal said not all Federal Reserve officials are convinced that much more monetary tightening is required, traders said.
Some dealers say the euro could rise as high as $1.2240 in Asia on the dollar-selling momentum generated by the reports.
The reaction to the reports underlines sensitivity to U.S.-China relations especially ahead of a meeting in Washington between President Bush and Chinese leader Hu Jintao later in the week, traders said.s
The Federal Reserve boosted a key interest rate, the federal funds rate, to a five-year high of 4.75 percent, and many analysts expect another rate increase on May 10, the Fed's next meeting.
The European Central Bank has also been raising interest rates, most recently to 2.5 percent last month.
The Bank of Japan has said it will start to raise interest rates, although they remain at zero for now - a measure the central bank took to encourage lending during economic stagnation.
http://www.newspress.com/Top/Article/article.jsp?Section=BUSINESS&ID=564718659877339717