APP: The dollar slumped on Wednesday following a report that China may slow or halt its purchases of US government bonds, with Wall Street stocks also opening lower.

Bloomberg News reported that officials reviewing China's foreign-exchange holdings have recommended slowing or halting purchases of US Treasuries, citing people familiar with the matter.

The dollar tumbled against the euro, which shot up above $1.20, and against the yen.

“If the reports turn out to be true and China no longer sees Treasuries as an attractive option, the repercussions could be significant as the country is one of the biggest holders of US debt,” said Craig Erlam, senior market analyst at currency trading firm OANDA.

Fewer Chinese purchases of US bonds would likely see interest rates paid to attract buyers climb higher, and thus the US Federal Reserve would have less need to hike rights.

“The tightening effect of such measures would likely have an impact on how many times the Federal Reserve raises interest rates this year, which is why we've seen a corresponding drop in the dollar,” said Erlam.

A senior US official downplayed the impact of possible scale down of Chinese purchases of Treasuries.

“The US treasury market is a deeply robust market within the world (and) with our economy strengthening it will remain a deeply robust market,” US under Secretary of the Treasury David Malpass said during a visit to Brussels.

Wall Street stocks, after closing at record highs on Tuesday, were on the back foot in Wednesday trading.

The Dow was down 0.2 percent in late morning trading.

Meanwhile in Europe, London's benchmark FTSE 100 index hit a record intra-day high of 7,756.11 points.  It closed the day up 0.2 percent at 7,748.51.

In the Eurozone, Frankfurt's DAX 30 dropped 0.8 percent and the Paris CAC 40 shed 0.4 percent.

Elsewhere, a rally across Asia that welcomed in 2018 looked to have run out of steam with most markets slipping into the red on profit-taking, but Hong Kong rose for a 12th day as share prices in energy groups climbed against a backdrop of firming oil prices.

Hong Kong's main stocks index is now less than 900 points off its record high of 31,958.41 hit in October 2007.

Shanghai finished up 0.2 percent, a ninth straight advance, but Tokyo ended 0.3 percent down.