June 2010: Capping credibility losses

Having grappled for a long period with the dilemma of heaping up dollar reserves when the US currency has often been under pressure on the foreign exchanges,
the Chinese monetary authorities are suddenly facing another challenge presented by the weakness of the euro. Perennial reports of the counter-productive effect on the value of Chinese currency holdings of a possible move out of the dollar have now been replaced by equal and opposite conjecture about the repercussions if the People’s Republic were to reverse the trend of the past 10 years and diversify again – back into the greenback.

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