Holy rumors Batman! China buying euros?

WHOA, Rumors That China Is Now DEVALUING The Yuan
China's largest export market is Europe. The renminbi is rising against the € because the RMB follows $ higher. If China is doing this, they are selling $ and buying €, which means they would devalue against the €, but gain against the $.

This is why I argued that China would not revalue while the U.S. dollar is rising. They're already allowing their currency to revalue higher, just by the fact that the U.S. dollar is rising. The fact that many people ignore, however, is that China's currency is expected to rise because it has a pile of U.S. dollars. It can change the mix of assets it holds, in which case RMB will strengthen versus the U.S. dollar. But if they outright sell U.S. dollars and deplete their reserves, then they cannot maintain the currency peg and they must devalue versus the U.S. dollar and the euro.

Depending on how powerful the weakness in the euro is, the Chinese may be forced into an across the board devaluation if the U.S. dollar continues to rally versus the euro.

P.S. The euro has major support at $1.25, so it wouldn't surprise me that there's heavy support at that level. People come up with all sorts of explanations for why "the market", millions of individuals, make decisions. Until there's confirmation, I'd assume that a lot of traders, and perhaps the Federal Reserve, ECB and Swiss central bank are more likely buyers of euros at this point.

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