The dollar slumped to a record low against the euro after Chinese
officials signaled plans to diversify the nation's $1.43 trillion of
foreign-exchange reserves in response to a falling U.S.
currency.
“We will favor stronger currencies over weaker ones, and will readjust accordingly,” Cheng Siwei, vice chairman of
China's National People's Congress, told a conference in Beijing. The dollar is “losing its status as the world currency,” Xu Jian, a
central
bank vice director, said at the same meeting.
The
dollar fell against all 16 of the most-active currencies, declining to
the weakest versus the Canadian dollar since the end of a fixed
exchange
rate in 1950, a 26-year low against the pound and a 23-year low versus the
Australian
dollar.
“The
main reason for the very sharp move is the comment that China could
further diversify out of dollar holdings,” Teis Knuthsen, the
Copenhagen-based head of foreign-exchange, fixed-income and derivative
research at Danske Bank A/S, the Nordic region's second-biggest lender.
“Further weakening of the dollar is very likely.”
The U.S.
currency slumped to $1.4704 per euro, the lowest since the 13-nation
currency debuted in January 1999, before trading at $1.4682 as of 9:48
a.m. yesterday in London, from $1.4557 late Tuesday. The dollar traded
as low as 113.32 yen, the lowest since Oct. 22. The euro fell against
the yen to 166.45 yen, from 166.99 on Tuesday.
Traders said the declines in the dollar accelerated after the euro fell below key levels where sell orders were placed.