SMM News: on May 15, US Eastern time, the US Treasury Department released statistics on major foreign holdings of securities in March, showing that China held US bonds of US $1.1205 trillion by the end of March, down US $10.4 billion from the previous month. The amount of US debt held at the end of March was also the lowest in nearly two years.
Reporters noted that the yield on the 10-year Treasury note fell one after another in March, with the lowest at 2.342% on March 28, the lowest level since the end of 2017.
U. S. 10-year futures continued to fluctuate higher in March, hitting a recent high of $124.97 at the end of March.
China's foreign exchange reserves stood at $3.0988 trillion at the end of March, up $8.6 billion, or 0.3 per cent, from the end of February, according to foreign exchange reserve data.
In March, mainly affected by multiple factors, such as the Sino-US economic and trade negotiations, the expected adjustment of monetary policy of the European and American central banks, and the uncertainty of Brexit, the US dollar index rose slightly, but the price of financial assets also rose. Exchange rate conversion and asset price changes and other factors, the size of foreign exchange reserves rose slightly.
As the largest international holder of US debt, what signal has been sent by China's reduction in its holdings?
Recently, the discussion about the international status of the dollar has quietly heated up in the market. Will the status of the dollar really be rewritten by a series of actions by the Trump administration? Recently, Tang Yao, an associate professor of applied economics at the Guanghua School of Management at Peking University, said that such a scenario is unlikely to occur in the medium term. There are the following reasons:
In the medium term, the supply of dollars in international financial markets will remain stable. First, the US trade deficit will remain large because its own consumer and investment demand exceeds its domestic capacity and needs to be supplemented by imports while paying out dollars. Secondly, there are a large number of offshore dollars circulating outside the United States, the fluctuation of the US trade deficit has little impact on the supply of offshore dollars, and the status of the dollar as the main payment and reserve currency will not change.
At present, there is no condition for the emergence of a supranational global currency. Behind the modern currency is mainly the national credit, the super-national currency needs the super-national credit. The Fed's mature control of monetary policy, an important pillar of dollar credit, is hard to shake Mr Trump's short-term policy. The euro is now a practical supranational currency, but there is no possibility of further expansion.
A return to the gold standard is highly unlikely because the supply of gold lacks flexibility to support the modern, complex monetary and banking system. In the coming decades, the current parallel situation of multiple international currencies will continue, and the RMB will gradually become one of the major international currencies.