China has been quietly
moving out of the dollar, concerned that U.S. debt will end up debasing
the dollar.
China cut its holdings of long-term Treasuries by $21.2 billion in June,
reducing total Chinese holdings of Treasury debt to $839.7 billion,
according to Bloomberg.
China has been diversifying its foreign-exchange reserves away from the
dollar, in favor of the euro and gold, since June 2009, when China's
holdings of U.S. Treasury debt peaked at around $950 trillion.
"Asian central banks holding some 60 percent of the world's
foreign-exchange reserves are turning away from the dollar," Bloomberg
noted. "Concerned about weakening U.S. growth and the Treasury's record
borrowing, they are switching toward euro assets to safeguard reserves,
driving gains in the 16-nation currency."
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