Chinese Save Euro?

On Wednesday night, Reuters reported that China was expected to purchase a large portion of Portugal's bailout bonds. The bailout bonds will go on sale next month. The euro rallied on the news, and the hawkish sentiment expressed by European Central Bank President Jean-Claude Trichet. Klaus Regling, CEO of the European Financial Stability Facility, stated that Asian investors were more interested in the bonds as a way to diversify their portfolios rather than as a ploy to save the European Union. Speculation over whether the euro can survive the debt problems faced by member countries such as Portugal, Spain and Greece has intensified in recent weeks. Dennis Gartman predicted this week that the euro would collapse after Germany decided to stop footing the bill and withdrew from the agreement. Perhaps if China is willing to share the burden with Germany, then the euro's collapse can be put off for the time being. Traders expecting the Chinese to employ their vast foreign reserves to save the euro may consider a long euro play such as iPath EUR/USD Exchange Rate ERO. ERO attempts to return a value corresponding to the strength of the euro against the U.S. dollar, and may do well if China works to prop the euro up. Perhaps most interesting is the question of whether China can support both the euro and the dollar?