FxWirePro: Dollar declines as Bloomberg reports China might reevaluate treasury purchases

Dollar, U.S. Treasuries as well as stock indices declined on Wednesday before U.S. markets are set to open for the day, on a report that China might reevaluate its purchases of the treasury. Bloomberg has broken the news that China is considering trimming of its Treasury purchases. According to the report, Chinese government officials, who are reviewing the country’s vast forex reserves of more than $3 trillion have made the comment.

China and Japan are the two largest foreign holders of U.S. Treasuries, with a combined value of more than $2.5 trillion. So such a policy change would have significant ramifications for the financial markets.

Traders have responded to the news by selling both Treasuries and the dollar, as well as the stock indices. The dollar index, which is the value of the dollar against a basket of currencies is down almost 0.6 percent for the day, trading at 91.98. The U.S. benchmark stock index, S&P500 is trading at 2740, down 0.3 percent for the day so far. U.S. 10-year benchmark yield has risen to 2.59 percent.