China's
holdings of US Treasury securities fell to US$846.7 billion in May, its
lowest since May 2010, from US$868.9 billion the previous month,
according to latest data from the U.S. Department of the Treasury.
Signs of de-dollarization are unfolding in the global economy, strategists at the biggest U.S. bank JPMorgan said on Monday.
The
strains of steep U.S. interest rate rises and sanctions that have
frozen Russia out of the global banking system have seen a fresh push by
the "BRICS" nations, Brazil, Russia, India, China and South Africa, to
challenge the dollar's hegemony.
In the FX reserves held by
central banks around the world, the greenback's share has declined to a
record low of 58%. Although that is still by far the largest share of
any global currency, it drops further when accounting for gold, which
now comprises 15% of reserves versus 11% five years ago.
China's
yuan now accounts for a record but still small 7% of FX trading volume,
while the euro's slice has shrunk 8 percentage points over the last
decade of ultra low interest rates to 31%.
Trade invoicing has
not seen much change, with the dollar and euro maintaining a steady
40-50% share over recent decades, although the U.S. share of global
exports is now estimated at a record low 9% compared to record high 13%
for China.
The "CNY" is 2.3% of SWIFT payments, JPMorgan's
analysts said, versus 43% for the dollar and 32% for the euro. The
Indian rupee share of SWIFT payments is minuscule.
Anonymous
6 comments:
Indian Rupee Avoided Like the Plague as It's Always Falling in Value
It’s time for Indians to get real about the Indian rupee’s global role. India’s botched effort to bypass the dollar to buy Russian oil shows the limits to internationalizing its currency.
A year ago, there was palpable excitement in New Delhi around buying Russian crude. The Reserve Bank of India allowed foreign banks to open special rupee accounts with local lenders to encourage trade settled in its home currency. Moscow-based Sberbank and VTB Bank were the first to come on board. The idea was that importers would credit these accounts, whose surplus could be invested in Indian government bonds.
For sellers of Russia’s flagship Urals crude in the spot market, avoiding dollar clearance meant bypassing the Western banking system and sanctions.
Yet, the plan hasn’t really worked. Russia’s banks are reluctant to accumulate balances with lenders in India in a non-convertible currency that has lost half its value against the dollar over the past 15 years. Throw into the calculation an expected annual rate of 3% to 4% currency depreciation, and earning a 7% yield on a 10-year rupee bond doesn't seem like such a big draw.
Why is the Indian rupee always falling in value? That's because India runs a chronically huge overall trade deficit every year. Hence in the foreign exchange market, there are always more Indian importers selling the rupee to buy foreign currencies than Indian exporters buying rupee against their trade receipts. As importer supply of rupee overwhelm exporter demand for rupee, the rupee naturally falls in value.
It is a mystery why China is not taking bigger steps to dump its USA treasury holdings. In order to be dead serious about de-dollarisation, China should take the lead to get rid of its holdings, rather than playing into the hands of the USA.
Letting the snake recover its foothold is a dangerous step to take, as it is still intent on bringing China down, an agenda it has never departed from. How much help China is going to give is not going to make any difference. You cannot change the behavior of the snake.
Let us see what comes out of the August BRICS summit in South Africa.
Bond price moves inversely to interest rate. If interest rate rises, bond price falls. As US Treasury Securities had fallen in prices due to the past year rapid rise in US interest rates, China will incur losses if it sell its US Treasury holdings before they reach maturity.
Hence China will hold its existing US debt securities till they reach maturity to avoid losses. But the total Chinese holdings of US Treasury Securities is falling, albeit glacially, because China is NOT buying any more new US debt, just letting its existing old US debt matures without replacement.
The Chinese has its version of SWIFT, called CIPS.
Now why would it use SWIFT for CNY transactions when it can use its own CIPS.
Of course, JPMorgan cant access data from CIPS & cannthus only report based on SWIFT data.
Anon 10.16 - Your enlightenment of China's holding position of US treasuries issue is appreciated.
Anon 9.52 am
To avoid getting South Africa into serious problems with the ICC, Putin will not be attending the BRICS summit in South Africa in person. He will be represented by Sergei Lavrov, and will be participating via video conferencing.
Now the ICC can arrest Lavrov, LOL, or arrest the TV set. Or the ICC can send its representative to Moscow to arrest Putin now. Putin will send them back in two 6.5 ft by 2ft by 2ft boxes to ICC headquarters in Dubai.
Post a Comment