China, Japan cut US holdings

09:31, March 17, 2010      

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China and Japan, the two biggest foreign holders of Treasuries, reduced their positions of US government debt in January as a measure of demand for American financial assets fell to a six-month low.

China remained the biggest owner abroad of Treasuries, even as its holdings dropped by a net $5.8 billion to $889 billion, according to data released on Monday in Washington by the United States Treasury Department .

Japan cut its holdings in January by $300 million to $765.4 billion, the report showed.

China has been a net seller of Treasuries for three straight months. This is the longest such stretch since the end of 2007.

Chinese officials have questioned the dollar's role as a reserve currency and recently sought assurances about the safety of US government debt as the budget deficit widens to a projected record $1.6 trillion this year.

"Foreign central banks stopped buying Treasuries in January," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd.

"If this were to continue, if China were to stop recycling its dollars into US Treasuries, it could have dire implications for Main Street America in that mortgage rates could move higher," said New York-based Rupkey.

International buying of long-term equities, notes and bonds totaled a net $19.1 billion, compared with net purchases of $63.3 billion in December, the report showed. That was the smallest net gain in purchases since July.

Source:China Daily
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