China used to support EUR
Analysts at Morgan Stanley point out that China still accumulates the biggest reserves in foreign currency approaching the $4 trillion mark. Such huge reserves have no doubt an impact on the market.
According to MS estimates, Chinese reserve managers bought more than $80 billion worth of euro from Q4, 2013, through Q1, 2014 as they were diversifying from the greenback. This helped to stabilize euro. In addition, they bought Canadian dollar and Japanese yen.
Looking ahead, Morgan Stanley thinks that China’s Forex reserve accumulation is likely to slow. Chinese managers are usually buying euro on dips and selling on rallies. So, euro might be able to drift lower in line with fundamentals and rate differentials.