An article by a senior official of China's State Administration of Foreign Exchange on Tuesday provoked a steep dive in the dollar against the euro and the Swiss franc in European trading.
The article, posted on the website of the think-tank China Finance 40 Forum, said that excess holdings in U.S. dollars could pose risks to China.
Reuters reported that Guan Tao, who is the head of the foreign exchange regulator's international payment department, said that if Washington further weakens the dollar, "We must be alert of economic and political risks in excessive holdings of U.S. dollar assets." He continued, "The United States has taken an expansionary fiscal and monetary policy to stimulate economic growth, and the United States may find it hard to resist the policy temptation of weakening the dollar abroad and pushing up inflation at home."
The dollar, already heading downward before Guan’s comments, hit a one-month low against the euro and other currencies, and entered record low territory compared with the Swiss franc.