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Wednesday, October 03, 2007

Vietnam and Qatar Change Dollar Reserve Policies

by Calculated Risk on 10/03/2007 08:28:00 PM

From the Telegraph: Dollar's double blow from Vietnam and Qatar

The Saigon Times said this morning that the State Bank of Vietnam was abandoning the attempt to hold down the Vietnamese currency through heavy purchases of dollars. The policy is causing the economy to overheat, driving up inflation to 8.8pc.

Vietnam, which has mid-sized reserves of $40bn, is seen as weather vane for the bigger Asian powers.

...Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99pc to 40pc, switching into investments in China, Japan, and emerging Asia.
The drastic shift by the Qatar Investment Authority is a warning that petro-dollar powers with some $3,500bn under management may pull the plug on the heavily endebted US economy.
An insightful blog to read on these issues is Brad Setser's Blog; in his own words, Brad has been "reserve-obsessed for quite some time now".