China & Japan Dump Treasuries as Hungary and Poland buy gold

China & Japan Dump Treasuries As Dollar's Reserve Status Slumps To 5 Year Lows

Zero Hedge,

16 October, 2018

Treasury International Capital flows showed Brazil the biggest buyer of Treasurys in August (followed by Ireland and France), but it was China and 'ally' Japan that dumped the most Treasurys in the month...

Brazil is Steve Mnuchin's best friend...

As China reduced their holdings of US Treasurys for the 3rd straight month...

 

Japan flipped to a seller again in August back to the lowest holdings since October 2011...

 

And while the Saudis were buying in August...

 

the broad trend among other majors has been selling...

 

All of which has driven the USDollar's share of global central bank reserve to its lowest since 2013...

 

And, according to economist Zach Pandl at Goldman Sachs, Washington’s aggressive policy against Moscow could be the biggest driver behind the recent fall of the dollar’s share of global central-bank reserves, who noted that Russia’s Central Bank sold some $85 billion of its $150 billion holding of the US assets from April through June after the US Treasury Department announced new sanctions on Russian businessmen, companies and government officials.

 

At the beginning of April, as RT reports, Washington expanded its anti-Russian sanction list, including seven Russian tycoons, 12 companies and 17 senior government officials over alleged meddling in the 2016 US presidential election, and according to Pandl, the co-head of global FX and emerging-market strategy, the US policy of unilateral tariff hikes and sanctions is putting at risk the greenback that is still dominating the global currency reserves.

“The Central Bank of Russia likely sold a large portion of its dollar-denominated assets, and perhaps all of its US Treasuries held by US custodians, and transferred them to euro-denominated and yuan-denominated bonds in the second quarter,” the economist said.

“This would account for more than half of the decline in the share of dollar reserves during the quarter.”

According to the recent data revealed by the International Monetary Fund, share of the US national currency in the global central-bank reserves declined to 62.3 percent in the second quarter with holdings in the euro, yen and yuan gained as a share of allocated reserves.

“Sanction risk appears to explain a significant portion of the observed decline,” the analyst said.

“The dollar’s share of reserve assets could decline further if other large reserve holders were to make similar changes as the Central Bank of Russia over time.”

Remember, nothing last forever...

Hungary Boosts Gold Reserves 10-Fold, Citing Safety Concerns

• Nation raises gold holdings to 31.5 tons, or 4.4% of reserves
• Poland added 9 tons in summer, biggest purchase since 1998

Bloomberg,

16 October, 2018

Hungary’s central bank increased its gold reserves 10-fold, citing the need to improve its holdings’ safety, joining regional peers with relatively high ownership in the European Union’s east.

Following a similar move by Poland, the central bank in Budapest now holds 31.5 tons of the metal, taking the share among total reserves to 4.4 percent, in line with the average in the region, according to a statement published on its website Tuesday.

Governor Gyorgy Matolcsy touted the move as a way to improve the security of the nation’s wealth and a nod to Hungary’s heritage as one of the world’s largest gold producers in the Middle Ages. Marton Nagy, Matolcsy’s deputy, declined to say if the bank’s overall reserves had grown.

Hungary is the latest European Union nation to make a rare charge into gold. The purchase takes its holdings to the highest in almost three decades and comes after Poland added about nine tons in July and August. While global central bank bullion reserves have expanded over the past 10 years, the purchases have mostly been driven by countries including Russia, Kazakhstan and China.

While it’s a large purchase for Hungary, the country is still a relatively small bullion holder, ranking outside the top 50 globally, according to World Gold Council data. The U.S. for example, owns about 8,133 tons and Romania, another eastern European state, holds about 104 tons. Russia has been adding about 20 tons on average each month this year.

Poland’s central bank declined to comment on its latest purchases, but economists said gold’s drop to the lowest price in more than a year had helped make the metal more attractive. Since touching that low in mid-August, prices have risen about 6 percent to $1,228 an ounce in London.

The move into gold follows the Hungarian monetary authority’s decision to relocate reserves to within the country in March.

"With Hungary’s gold levels below average and regional peers adding to holdings, it makes sense to maintain some kind of parity," said Gergely Palffy, an analyst at Raiffeisen Bank International AG in Budapest. "The announcement will have limited impact from a market perspective."

China & Japan Dump Treasuries As Dollar's Reserve Status Slumps To 5 Year Low