Traders with large dollar holdings began to sell rather than suffer further losses.

But most traders believe fears of central bank intervention keep investors from aggressively trying to sell their dollar holdings.

Falling American rates would reduce returns on dollar holdings and thus lessen investment interest in dollars.

Already, rumors are rampant that several central banks with significant dollar holdings may diversify into other currencies.

This can discourage investment from abroad and lead foreigners to sell their dollar holdings.

Perhaps some recognized this possibility and decided to pare their dollar holdings.

The value of its dollar holdings will tumble, as it floods the markets with Treasury bills.

That makes the dollar scarce and dollar holdings profitable.

This pushed their total dollar holdings to $40 billion.

Dealers probably decided the time was right to increase their dollar holdings after lightening them in recent days, he said.