(Yicai Global) June 20 -- Eight of the ten biggest holders of United States Treasuries shed their holdings in April amid interest rate hikes by the Federal Reserve and a looming trade war between the world’s two largest economies.
The Chinese mainland ditched USD5.8 billion in April after having a five-month high of nearly USD1.19 trillion in March, 21st Century Business Herald reported today, citing data released by the US Treasury on June 16. The country still remained the world’s biggest foreign owner of US debt.
Brazil and the Cayman Islands were the only members of the top ten overseas holders to bolster their March figures, while Japan cut its holdings for the third straight month to leave it with USD1.03 trillion, its lowest balance since October 2011.
The fact that many countries reduced their holdings in April has little to do with the rise of US trade protectionism, and is rather the result of a fire in their own backyard, said Nomura forex strategist Jordan Rochester.
In Japan, the yen once hit an annual high against the dollar in April, leading to a lot of yen carry trades flowing back, he said. Many Japanese institutions then sold US Treasuries, swapped dollars for yen and returned to Japan to avoid the risk of forex losses on their overseas investment positions, reducing the size of Japan’s US Treasuries holdings month by month.
That month, India, the Philippines and Mexico cut their holdings as their domestic currencies wavered against a sharp dollar rise late in the month, forcing them to sell Treasuries ahead of schedule to raise dollars and intervene in the forex market to stabilize their own exchange rates, he added.