A high-ranking official in China’s government recently gave a speech urging the Central Bank to (continue to) diversify its vast holdings of foreign exchange, currently estimated at $1.4 Trillion and rising. The speech was atypical in its level of directness, as Chinese officials tend to speak with a certain degree of circumspection if they think there is any possibility that their comments will reach the public. Specifically, he advocated making a play on the current volatility in forex markets, by selling “weak currencies” in favor of “strong currencies.” In fact, the most recent data shows that China is already doing just that: its holdings of US government bonds have declined even as its reserves have risen.
Why do officials have to talk that much?
Perhaps because they are politicians too.
And trend followers would just follow the price. he he he