Asia's Stockpiles of Dollars Pose U.S. Economic Risks | LA Times

[Ediacara]

Asia's Stockpiles of Dollars Pose U.S. Economic Risks


A sign in Tokyo quotes 104.24 yen to the dollar last
week. The next day the greenback hit a four-year
low vs. the yen.
(AFP)

By Tyler Marshall, Times Staff Writer

HONG KONG — A massive buildup of U.S. dollars held by Japan, China and other Asian countries is fueling increasing unease among analysts and policymakers, who fear it poses risks to the fragile American economic recovery and global financial stability.

Collectively, Asian countries hold foreign exchange reserves — mostly in dollars — valued at more than $2 trillion, nearly triple that of just seven years ago, according to the Asian Development Bank. Those dollar holdings continue to grow rapidly, with the Japanese and Chinese governments particularly heavy buyers.

Asian governments buy dollars because it helps boost their export-led economies. Snapping them up keeps the greenback's value high and the value of regional currencies low, giving Asian countries a vital competitive edge in foreign markets.

More at the Los Angeles Times

[revcarol]

1. How much longer are they going to keep buying $$, supporting our debt?

Japan is out for the present, so I guess CHINA will own us.

[Aussie_Hillbilly]

2. Ouch.

Asian governments buy dollars because it helps boost their export-led economies. Snapping them up keeps the greenback's value high and the value of regional currencies low, giving Asian countries a vital competitive edge in foreign markets.

And at some point the flow will have to go into reverse (short-selling), probably suddenly, if that's what the asian governments want. I wondered who was propping up the greenback, and why. Now we know.

Wonder what would happen if the purchasing power of the $US dropped sharply just before the election?

Sadly, the asian central banks might put it off for a few years yet if they have enough money coming in to finance Bush's deficits.