June 4, 2010 / 3:13 PM / 9 years ago

China buying euros assets to stabilize currency-Medley

NEW YORK, June 4 (Reuters) - Hedge fund advisor Medley Global Advisors issued a report on Friday saying China is buying euro-denominated assets in order to underpin the currency, causing a slight strengthening against the U.S. dollar, a source told Reuters.

The report, titled “China Buying Euros,” was seen contributing to the euro rising to $1.2075 from $1.2025 in early New York trade.

“China is purchasing euro assets in order to stabilize the euro’s decline, according to well placed sources in Beijing,” said a source who read directly from the three paragraph Medley report.

“Chinese sources indicating a sensitivity to the $1.20 level,” the report said, according to the source.

According to the report, both Beijing and Washington recognize that an unruly depreciation would have a significant impact on both countries’ exports and could then affect the trajectory of their growth rebound.

China is therefore likely to remain cautious about exiting from stimulus policies, the report said.

In addition, the report said the Bank for International Settlements, which fosters international monetary and financial cooperation and serves as a bank for central banks, was seen in trading in the currency markets earlier on Friday buying euros around the day’s low of $1.2019.

“There is a fairly limited reaction to the report so far today, but I think it did play a role in lifting the euro,” said one currency trader who heard about the report but requested anonymity because he is not authorized to speak publicly. (Reporting by Daniel Bases; Editing by Kenneth Barry)

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