China cuts Treasury holdings -report

[Dover]

China cuts Treasury holdings -report

By CBS MarketWatch
Last Update: 11:44 PM ET Nov. 25, 2004


TOKYO (CBS.MW) -- China has cut the size of its U.S. Treasury bond holdings in its foreign exchange reserves to $180 billion to avoid losses from a weakening dollar, according to a published report.


A report in the Shanghai-based China Business News cited Yu Yongding, a member of the monetary policy committee under the central bank, according to AFX-Asia.

The report did not say how much of a reduction in Treasury debt the cut represented. The central bank normally does not disclose the composition of its foreign exchange holdings...cont'd

http://cbs.marketwatch.com/news/story.asp?guid=%7BBFCC42B4%2D4153%2D484D%2D988B%2D2CDBE10A9415%7D&siteid=mktw

[Deja Q]

1. Uh-oh.

n/t

[Anarcho-Socialist]

2. With the way things are going

The Dollar will not be the world's reserve currency in 12 months time.

[Not a robought]

3. China does not miss a beat

so to speak.

[Dover]

4. These posts are from another financial chatroom in response to this story.

If the China report is true
Nov 26, 01:13

and I remain skeptical until I see confirmation, then the world has literally changed overnight.

Examine the situation this way. The buyer of US debt says "no more." This means Foreign financing the deficits is impossible and the deficits are going to get far worse. This places the bond market at serious risk, no, dire risk.

The bonds have trended upward for 25 years. A break of the trend and rates go to the sky. The FED is now the buyer of last resort or the US implodes.

Currency intervention is now at best a band aid. You have a few CB's willing to buy and everyone else wanting to sell. Give me some intervention and I'll sell every dollar I don't need for the next year. That is now the mindset.


The Bank of England's Charles Bean said in a speech that imbalances in global current accounts and their effect on exchange rates were one of the biggest threats to the economic outlook.

He added that the dollar could be heading for more losses because "overseas investors are unlikely to continue accumulating dollar assets at the current rate indefinitely."

Japanese Finance Minister Sadakazu Tanigaki repeated his warning against dollar weakness, threatening to take action against sudden moves, but market participants said such verbal intervention had long lost its clout.


So now what do all of the guests on CNBC say? The $ fall has been a good thing according to the last 6000 guests. The only exception...Stephen Roach.


_________________________________________________________________

The confirmation you need can be found by looking up China's foreign reserves and US Treasury holdings and noting that the % of UST in China's reserves took a dive in September. That was 36.6% in August and fell to 33.9% in September. The peak was 42.5% in June 2003. In September, China held US$175 billion of Treasuries which really isn't a big number. China's reserves have been growing steadily, and so has the nominal amount of US Treasury holdings -- it is the *proportion* which is falling. Japan, in comparison, holds US$720 billion and their ratio is 86.5%, a touch lower than the record of 87.2% reached in August.

(This brings to mind the "greater fool" theory.)

I took China's foreign reserve numbers of the website of the Hong Kong Monetary Authority, and the data on US Treasury holdings is available from the US Treasury Department's TIC data.
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DOW JONES NEWSWIRES

TOKYO (Dow Jones)--The dollar remained mired near four and half month lows versus the yen in Asia Friday on worries that the Japanese Finance Ministry would take advantage of holiday-thinned trade to intervene in the markets.

The dollar also edged lower versus the euro on selling by model funds and hedge funds as investors increasingly believe the greenback will have to fall further to help correct the U.S. current account and trade deficits.

Trade in foreign exchange markets is expected to remain thin throughout the global session as many U.S. investors take an extended Thanksgiving Day holiday.
Talk swirled during the Asian session that the Bank of Japan had placed bids to buy the dollar, but most traders discounted these rumors. An analyst report citing the possibility that the People&aposs Bank of China will reduce its U.S. Treasurys holdings also sent the dollar lower against the yen and the euro, but only briefly.


"When trading volume is thin, it&aposs very easy for rumors and other talk to influence the market," said Akifumi Uchida, senior manager of financial products at Sumitomo Trust & Banking Co. "But it shows how worried players are about things like the U.S. twin deficit problem."


Leading economists and finance officials, including the Bank of England&aposs chief economist Charles Bean and Federal Reserve chairman Alan Greenspan, have questioned whether the dollar has weakened enough to adjust structural imbalances and how willing overseas investors are to continue buying U.S. assets.
An escalation in Japanese officials&apos verbal warnings against further yen strength also made investors hesitant to trade aggressively. Earlier on Friday Japan&aposs Finance Minister Sadakazu Tanigaki said, "there is no change in our position that we will take timely and stern action against sharp and unstable moves" in foreign exchange markets.

[ooglymoogly]

5. well... kel suprize

who would have guessed that a complete bungling pillaging and raping of the economy would produce dire consequences? thats such a foreign concept...geeesh!! who knew?

[Coryoth]

6. Will Japan follow?

Japan is easily the largest foreign holder of US debt. China was second. Certainly with the falling dollar such possibilities were likely. The question is: will Japan follow China - and if so, how much could that drive inflation in the US?