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Friday, October 19, 2007

Asia: largest dollar dump in 5 years

Japan, China Sell Most U.S. Debt in at Least 5 Years (Update3)

Bloomberg

By David Yong and Wes Goodman

Oct. 17 (Bloomberg) -- Japan, China and Taiwan sold U.S. Treasuries at the fastest pace in at least five years in August as losses linked to U.S. subprime mortgages sparked a slump in the dollar.

Japan cut its holdings by 4 percent to $586 billion, the most since a new benchmark for the data was created in March 2000, Treasury Department figures published yesterday showed. China's ownership of U.S. government bonds fell by 2.2 percent to $400 billion, the fastest pace since April 2002. Taiwan's slid 8.9 percent to $52 billion, the most since October 2000.

Asia's dumping of Treasuries exacerbated the biggest sell- off in U.S. financial assets since Russia defaulted in 1998. The dollar has declined by 7.2 percent this year to a record low against the euro as the Federal Reserve cut interest rates last month to support the housing market, reducing the yield advantage of U.S. fixed income assets.

``People are concerned about the U.S. dollar falling,'' said Hiromasa Nakamura, who helps oversee the equivalent of $25.7 billion at Mizuho Asset Management Co. in Tokyo. ``The Fed will continue to cut rates and the dollar may fall for three to six months.''

The dollar fell to 116.82 yen at 11:16 a.m. in London, 116.92 late in New York yesterday and traded at $1.4171 per euro, close to a record low of $1.4283.

Sovereign Wealth Funds

The cutback on Treasuries came as China and South Korea joined Singapore and Norway in setting up so-called sovereign wealth funds to invest excess foreign-exchange reserves from export revenue to improve returns....   Read on>> 

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