Must-Read News – 9/14/11 – China Buys EuroBonds to Diversify FX Reserves,Reduce Dollar Role; Moody’s cuts French banks as euro crisis deepens; Fitch downgrades Spanish regions on fiscal issues

“China, as the world’s biggest foreign buyer of U.S. Treasury bonds, is purchasing European bonds in a bid to diversify its foreign exchange reserves and reduce global dependence on the U.S. dollar, the official Xinhua News Agency said Wednesday.

“This will lessen the world’s dependence on the U.S. dollar as the sole global reserve currency and begin a shift toward a more multipolar reserve system,” the news agency said in a commentary.

Chinese officials have said they want a bigger global role for their own currency and a reduced dependence on the dollar. ”

“Moody’s cut the credit ratings of two French banks on Wednesday because of their exposure to Greece’s debt, highlighting growing risks to Europe’s financial sector from the deepening euro zone sovereign debt crisis.

The one-notch downgrade of Societe Generale and Credit Agricole came hours before the leaders of Greece, France and Germany were due to hold a video conference on measures to head off a possible Greek default, which has prompted rising global alarm over the potential fallout. ”

“Fitch Ratings Wednesday downgraded five Spanish regions, as worries mount that local governments could derail Spain’s efforts to slash one of the euro zone’s largest budget deficits.

In a short statement, the credit ratings company said it had lowered Andalusia and the Canary Islands to A+ from AA-, Catalonia to A- from A, Murcia to A from AA- and Valencia to A- from A. It has negative outlooks on all five.

Fitch cited “sharp fiscal deterioration” as the reason for the downgrades, noting that the Spanish finance ministry recently said first-half revenue for Spanish regions had declined by 3.6% on the year and that they had a combined budget deficit equal to 1.2% of gross domestic product. The finance ministry also said most of the country’s 17 regions were not on track to meet their year-end deficit targets. ”

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