No plan to halt US bond purchases – China

China, at the weekend, denied a report that it might slow down or cease its purchases of US Treasury bonds, calling it a possible case of “fake news” after the dollar tumbled following the story.
Bloomberg News reported that officials reviewing China’s foreign-exchange holdings had recommended slowing or halting purchases of US Treasuries, citing people familiar with the matter.
“We think this story could be quoting a mistaken source or it could also be a piece of fake news,” the State Administration of Foreign Exchange said in a statement on its website.
Beijing is the biggest holder of US debt and the news was seen by some as a veiled threat to President Donald Trump following his tough talk on global trade and, in particular, what he sees as China’s unfair practices.
“The management of investments in China’s foreign exchange reserves has always been carried out according to the principle of diversification and distribution,” SAFE said in its statement.
“As with other investments, professional management of China’s foreign reserves investment in American bonds is professionally managed according to market activity, on the basis of market conditions and investment
needs.”
The greenback sank against most of its peers following the news, on fears that a huge amount of foreign demand for dollars would dry up.
The bond market reacted negatively before recovering through the day and ending slightly up.
“US Treasuries are often used during the political ping-pong match when trade tensions escalate,” said Stephen Innes, head of trading for OANDA in the Asia Pacific.
“It’s entirely possible that China could take measure to rebalance their reserve as they have done in the past,” Innes said.
But markets quickly realised “it’s highly improbable China will stop buying US Treasuries”.