EUR/USD: Why China adds to the bearish case?

FXStreet (Bali) - As EUR/USD traders shift their focus gradually away from Greece - if only temporarily - and pay more attention to diverging monetary policies between the ECB and the Fed - clearly exposing downside risks - , there might be yet another driver adding to the case of a lower rate in the most traded pair in the market.

While in recent years China's needs to diversify its $4 trillion foreign-exchange reserves portfolio away from USD and into Euros led to an increase in the channels of demand for the single currency, that favourable Euro driver may no longer play its part, as the PBOC may start to "find its reserves out of balance", Bloomberg notes.

As Bloomberg reports: "After unloading dollars to bolster the yuan, the central bank may find its reserves out of balance. That may lead it to replenish holdings of the U.S. currency and dump some euros, according to Credit Suisse Group AG. After the dollar, the euro is the most widely used reserve currency for central banks, IMF data show."