imported post
Japan to reduce dollar holdings in forex reserves - finance official
06.26.2005, 06:56 AM
TIANJIN, China, (AFX) - Japan hopes to rebalance its foreign exchange reserves with less US dollars when the dollar regains enough strength to withstand such a reform, a Japanese finance official said at a meeting of Asian and European finance ministers here.
Hiroshi Watanabe, Vice Minister of Finance for International Affairs with Japan's Finance Ministry, said Japan did not intend to switch its holdings of US dollars into other currencies at the moment.
'But if the dollar is very strong and there is going to be no negative impact from the move, in that case, we're going to move,' he said.
Japan has the highest levels of foreign exchange holdings in the world, totalling 842.47 bln usd in May.
Critics claim the heavy reliance on dollar-denominated assets within these holdings leaves Japan too exposed to volatility in the dollar and partly finances a large and unhealthy US deficit.
Watanabe said Japan in future wants to align the currency mix of its foreign exchange reserves with that of its trade settlement account, taking into account the increasing importance of the euro.
European Commissioner for Economic and Financial Affairs Joaquin Almunia said on the sidelines of the same meeting that he had not raised with Japan the euro's role in Japan's foreign exchange holdings.
He said European authorities are not promoting the use of the euro in the world.
However, China's Premier Wen Jiabao spoke at the opening session of the Tianjin meeting of the need to maintain the stability of the major reserve currencies.
He also said the role of the euro in achieving international financial stability should be supported.
Almunia said after Wen's speech: 'It's up to the markets and up to the players to decide if they want or if they don't want to have euros in their portfolios.'
Increased buying of euro-denominated assets could see a rise in the currency's value and further erode the competitiveness of European exports.
A recovery in the US dollar, however, saw the European currency drop last week to its lowest levels since last August.
Almunia said he has no concerns about the current price or volatility of the euro.
'If you look at the present exchange rate for the euro, it's very close to the average of these trends so we're not concerned about that. We think that is normal in a world of flexible exchange rates.'
On the yen, Watanabe said he did not expect a significant movement in Japan's currency if the yuan revalues.
China's Wen earlier today recommitted his country to gradually adopting a more flexible exchange rate, without saying when.
The yuan is deemed by China's biggest trading partners to be too cheap and is expected to appreciate if revalued, possibly contributing to a rise in other Asian currencies.
Watanabe said the yen is only linked to the Chinese currency through Japan's exports to China and the relationship between the yuan and the currencies of Japan's other trading partners, including the US and Asian nations.
'I think there will be no direct impact if the yuan appreciates,' he said.
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off tt...stand by my theory that the dollar and bonds are being pumped while the asians dump it for the euro and euro denominated bonds.
When this portfolio reshuffling is over, you'll see the buck drop like a ton of bricks and same with US treasuries.