A Bloomberg report said the the largest foreign creditor to the US, China, has upped its holdings in Treasuries in October, almost hitting the record level last achieved in July 2011. The report said that this was the case as the US Federal Reserve has opted not to slow its bond purchases as was expected by many.
According to Treasury Department data that was released yesterday, China's holdings in Treasuries increased 0.8% to $1.304 trillion. In July 2011, China has held a record $1.314 trillion in US Treasuries then. Foreign holdings held by China in total increased 0.01% or $600 million in October to $5.65 trillion.
On September 18, officials of the Fed had surprised many roiled markets and traders all over the world when it announced that it will be continuing with its $85 billion monthly bond purchases. Based from 66% of economists that participated in a December 6 survey conducted by the news agency, they believed that policymakers will not start tapering quantitative easing measures this week either. The report said the Treasuries demand in China increased as foreign currency reserves saw a 4.7% hike in the third quarter ending September this year and that the central bank People's Bank of China was seeking to keep its national currency the yuan within its manageable trading range.
RBS Securities Inc US government bond strategist John Briggs said, "As money enters that country, that gets turned into intervention, and that intervention gets turned into Treasuries. When they didn't taper a lot of pressure came off of those markets and some money flowed into emerging markets, including China."
China Foreign Exchange Trade System prices showed that the yuan traded 6.0712 per US dollar as of 11:41AM in Shanghai, which was a increase from CNY6.0715 to the US dollar yesterday. According to Bloomberg, the yuan has appreciated 2.6% against the dollar this year and reached a high of CNY6.0703 to the US dollar on December 10, not seen before in the past 20 years.
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