Dollar Drops on Reports that China may stop its treasury purchase

U.S. Dollar sold-off after a report began to circulate that China may be looking to stop treasury purchase.

produced a jump in Treasury Yields to go along with a drop in the U.S. Dollar;

× Get the best parts of DailyFX.com in the new DailyFX AppDownload
Dollar Drops on Reports that China May Slow or Halt Treasury Purchases
Jan 10, 2018 5:30 pm +03:00
James Stanley

by James Stanley, Currency Strategist
Talking Points:

• The U.S. Dollar sold-off after a report began to circulate that China may be looking to further slow or halt Treasury purchases.

• This produced a jump in Treasury Yields to go along with a drop in the U.S. Dollar; pushing the Greenback towards 2018 support, around 91.80 in ‘DXY’.

• Are you looking to improve your trading approach? Our Traits of Successful Traders can help, and it’s free-of-charge.

To receive James Stanley’s Analysis directly via email, please sign up here

The U.S. Dollar put in another bearish move this morning, with the past couple of hours wiping away most of the post-NFP gains that had come-in to the Greenback. One of the drivers, if not the likely culprit of the sell-off is a circulating report indicating that officials in Beijing have recommended ‘slowing or halting’ treasury purchases. The report came out via Bloomberg around 5:26 AM Eastern Time, and that’s right around the time that this recent sell-off began.

The timing of this warning is likely more than coincidence, as the 10-Year just crossed 2.5%, and last night, just hours before this report began to make its way through markets - a different report indicated that the U.S. would decide on trade sanctions against China later this month. While many are watching the situation around North Korea for heightened sanctions, the report last night indicated that the U.S. will be investigating sanctions as a remedy for the massive trade deficit that the U.S. has with China. The net response thus far has been a rise in U.S. Treasury Yields to go along with a move of pronounced weakness in the U.S. Dollar