In a potentially significant development for investors in currency futures, China has indicated that it plans to hold on to its bond holdings from the euro zone.
The euro has had a difficult couple of weeks brought on by the region’s sovereign debt crisis and concern about whether the continent’s leaders will be able to muster an adequate response to the situation. If China had indicated that it would sell its euro bonds, the result could have been a dramatic drop in the currency, as well as world markets in general.
For example, after the news broke on Thursday afternoon, the Dow Jones Industrial Average was up more than 200 points, bringing it back above the 10,000 level that it slipped below earlier in the week.
According to a report from the BBC, China holds about $2.5 trillion in overseas assets, although their exact makeup is said to be a state secret. However, the British news agency added that Beijing is thought to hold about $630 billion in euros, along with a larger percentage of U.S. debt.
Elsewhere, CNNMoney.com quoted Peter Cardillo, chief market economist at Avalon Partners, as saying that shedding euro debt “would have been detrimental for China too” from a global economic standpoint.
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