Dollar falls as China threatens to unload US assets

NEW YORK, Aug 8, 2007 (AFP) – The dollar weakened against the euro and other world currencies Wednesday after a British newspaper report claimed China’s government may “liquidate” its large holdings of US assets if Washington imposes threatened trade sanctions on Beijing. The dollar did gain against the Japanese yen, however, rising to 119.72 compared with 118.82 a day earlier.

The US currency was swapping hands at 1.1964 Swiss francs, down from 1.1972 late Tuesday. Some US lawmakers have called for trade sanctions to be slapped on China, accusing the rising Asian economic power of artificially suppressing its currency, the yuan, to bolster its exports.

The dollar fell on foreign exchange markets after Britain’s Daily Telegraph newspaper reported that Chinese Communist Party officials had hinted Beijing may use its 1.33 trillion dollars of foreign reserves “as a political weapon” to deter the US Congress from taking action.

The euro was changing hands at 1.3796 dollars at 2100 GMT, up from 1.3736 dollars late Tuesday. The British pound meanwhile had climbed to 2.0371 dollars, up from 2.0211 dollars late Tuesday.

Such currency moves can make it more expensive for US companies to conduct business overseas, although exporters can benefit from dollar weakn