China And Japan Just Dumped Billions Of Dollars
By Joshua Krause
ActivistPost.com
DECEMBER 10, 2015
Over the past few years the dollar has staged an impressive comeback. Not because there’s anything fundamentally good about this currency’s future prospects, but because for the interim, most of the economies in world aren’t doing so hot. For a lot of investors, it is the lesser of many evils in the short term, so they view the dollar as a temporary safe haven.
However, recent signs suggest that the dollar’s rally may be coming to an end. Among them, is the fact that China and Japan, the world’s two largest holders of U.S. Treasury Debt, have just dumped a ton of dollars.
November marked a record month for China in terms of the pace of its liquidation of foreign exchange reserves. The People’s Bank of China reported on Monday, December 7 that foreign exchange reserves, which mostly consist of U.S. Treasury debt, dwindled by another $87 billion in November. This constitutes a stunning 2.5% drop in one month.
Since peaking at $3.99 trillion in June 2014, China’s central bank has sold off more than half a trillion dollars of (mostly) U.S. treasuries, accounting for 14% of its entire stockpile. At this rate China’s foreign exchange holdings will be liquidated within nine years. While there is no reason to assume the current rate will continue for that long, it does illustrate how fast the debt and currency markets are moving, hinting at possible instability ahead.
Right behind the largest U.S. Treasury holder is the second largest, Japan. Japan’s Ministry of Finance also reported a sharp drop in its own foreign exchange reserves in November, likewise also mostly U.S. Treasuries. Japan’s stockpile is now $1.233 trillion, down from $1.244 trillion last month for a drop of 1%. Since peaking, Japan’s hoard has dwindled by 6%, and the decline has so far lasted four years.
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