Lets put one misinterpretation to rest.
If China wants to buy European debt, it doesn’t have to buy EUR/USD in the market to do so…China’s largest single export market is the EU, so it receives boatloads of Euros in the course of its daily business.
It merely reinvests (recycles) those euros into European bonds the same way it does with its US dollars.
To be sure, it is better for the euro that China reinvests them rather than dump them for some other currency…
It could sell dollars to buy euros if it really wants to ramp up exposure, but it does not mean that it will necessarily do anything more in the future than it did yesterday…
EUR/USD has taken on a weaker tone after an earlier rally toward range-tops faltered at 1.3192 in NY.
Looks like the market is comfortable with 1.31/1.32 at the moment…
