Dollar Slumps to Record on China's Plans to Diversify Reserves

Source: Bloomberg.com
Nov. 7 (Bloomberg) -- The dollar fell the most since September against the currencies of its six biggest trading partners after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves.
The dollar fell against all 16 of the most-active currencies, declining to the weakest versus the Canadian dollar since the end of a fixed exchange rate in 1950, a 26-year low against the pound and a 23-year low versus the Australian dollar. The New York Board of Trade's dollar index dropped to 75.21 today, the lowest since the gauge started in March 1973.
``Further weakening of the dollar is very likely,'' said Teis Knuthsen, the Copenhagen-based head of foreign-exchange, fixed-income and derivative research at Danske Bank A/S, the Nordic region's second-biggest lender. China may ``diversify out of dollar holdings.''
``We will favor stronger currencies over weaker ones, and will readjust accordingly,'' Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing. The dollar is ``losing its status as the world currency,'' Xu Jian, a central bank vice director, said at the same meeting.

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