China has been diversifying its forex reserves for the last several years, as have central banks in other countries like South Korea, Brazil, Russia.
How’s that been working out? Not so well. Case in point: China.
The reason for the difference is that swings in the value of currencies and the prices of securities shaved $48 billion off the first quarter’s net $95.9 billion increase in reserves, according to SAFE’s figures. The agency has recently started reporting these valuation changes in an effort to be more transparent about the reserves, which are closely watched by investors for their impact on global financial markets.
Merely a rounding error for China but it bears watching if they begin to lose confidence in the euro. Funny how the nightmare scenario has shifted in the last six months when it was the dollar that was at risk…
