Fake news or intentional leak: is China halting US Treasury purchases?
China could be using a forex portfolio reshuffle as political tactic to temper Trump’s protectionist intentions, analysts say
China’s foreign exchange watchdog has denied on Thursday that Beijing was considering suspending or slowing down its purchase of US Treasuries, refuting a news report the previous day which has weighed on US government bonds and the US dollar.
Bloomberg cited unnamed sources on Wednesday as saying that Chinese officials were reviewing the country’s US$3.1 trillion in foreign exchange holdings, and had recommended halting or slowing purchases of US Treasury bonds due to the declining attractiveness of the asset and rising US-China trade tensions.
The report sent 10-year US Treasury yields to a 10-month high of 2.59 per cent and the dollar index lower to 92.3 on Wednesday night.
The State Administration of Foreign Exchange (SAFE) said on Thursday that the Bloomberg report had “cited a wrong source, or could be fake news”.
“China has been diversifying its forex reserves investments and its investments in US Treasuries is market-driven,” SAFE said on its website.
Whether it was fake news or not, analysts said the drama could be Beijing’s political tactic to temper Trump’s protectionist intentions and manage the scale of future trade disputes. The probability for a significant portfolio change in China’s foreign reserve account was unlikely, they said.