China’s official foreign exchange manager is still buying record amounts of U.S. government bonds, in spite of Beijing’s increasingly vocal fear of a dollar collapse, the Financial Times reported.
In a story on its website, the FT quoted Chinese and western officials in Beijing as saying China was caught in a “dollar trap.”
The newspaper said China had little choice but to keep pouring the bulk of its growing reserves into U.S. Treasuries, which remains the only market big enough and liquid enough to support its huge purchases.
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The FT’s story lent support to U.S. Treasury futures in Asian trading on Monday, analysts said.
“The FT article probably helped boost the confidence of Treasuries holders who were anxious about potential selling by other players amid worries of a possible U.S. downgrade,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC.