Reports that China may halt US government bond purchases may be incorrect

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Less than 24 hours ago, financial markets received an almighty jolt.

A report from Bloomberg suggesting that China may be looking to slow or halt purchases of US government bonds rippled across the markets.

The US dollar fell, as did US bonds and stocks.

It appears the report may have been incorrect.

According to Reuters, citing a statement from China’s foreign exchange regulator, The State Administration of Foreign Exchange (SAFE), the report on US bond purchases “could be based on erroneous information”.

“China has been diversifying its forex reserves investments and its investments in US Treasuries is market-driven,” SAFE said on its website.

It added that “China’s forex reserves management departments are responsible investors”.

Like the initial report, financial markets have reacted hastily to the news, bidding up both the US dollar and treasuries in response.

The largest currency market move has come from the Japanese yen with the USD/JPY sitting up 0.26% at 117.71, recovering after hitting a low of 111.33 earlier in the session.

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