It’s a long way from the world of our childhood to read today that China is attempting to reassure the world about its confidence in the U.S. Dollar, but that’s where we are today.

The Dollar hasn’t done that well recently.  Fears of trade surplus countries, such as China and OPEC nations, diversifying their currency reserves away from the Dollar into other major currencies, such as the Euro and the Yen, have not helped.

In the midst of the general market panic of the last week or two, China’s central bank apparently felt the need to help stabilize the situation.

We doubt there was any sympathy or charity in their announcement, but concerning their $1.3 trillion in currency reserves, they said that the U.S. Dollar has “major role” to play.

That is far from a commitment not to diversify away from the Dollar, but it will probably diminish one of the factors spooking the markets recently.

The anonymous central bank figure, according to the official Xinhua news service, said that China’s priorities for its foreign-currency reserves were safety, liquidity and investment returns, in that order.

For a variety of reasons, including nationalistic ones, we would have preferred that it was the U.S. assuring the world about the Yuan, but in today’s difficult market, we are happy to see any calming announcements that China would like to contribute to the market’s mindset.

The China announcement may show up in some price action during the week of August 13 in the Currency Shares ETFs, such as the Euro tracker (FXE),  or in the Powershares Dollar Bearish (UDN) or Dollar Bullish (UUP) ETFs.

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