Strategists at Faros Trading LLC believe that euro and yen will advance as China’s reducing the amounts of its investments in US Treasuries in favor deep European, Japanese and British bond markets that correspond to more liquid currencies.
The specialists expect the single currency to add 6% during 2 months that follow China’s June 19 decision to stop yuan’s peg to the greenback and rise to the maximum since April. Chinese Premier Wen Jiabao referred today to Europe as a major market for China to place its foreign-exchange reserves.
Nowadays China has the largest foreign-exchange reserves equal to $2.45 trillion at the end of June and the biggest overseas holdings of US Treasuries. It’s necessary to mention, that the United States account for 20% of China trade, while the EU’s and Japan’s shares are respectively 20% and 16%.
As a result, Faros Trading claims that there is the need of changing the ratio of country’s reserves allocation taking into account that China is now able to conduct more flexible monetary policy after its national currency is no more fixed to US dollar.

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