As reported by Reuters, foreign purchases of US Treasuries rebounded from a 17-month low, even though the US Dollar declined across the broader market.
Overseas central banks could buy more U.S. government debt to hold down the value of their currencies against the dollar, which is seen as a counter measure against U.S. tariffs on their countries’ exports.
On the other hand, they could reduce their Treasuries holdings when the dollar strengthens, to defend their currencies in a bid to stem capital outflows.
The U.S. central bank’s custody holdings of U.S. government debt securities for overseas central banks totaled $3.028 trillion on Jan. 9. This was above the $3.011 trillion a week earlier, which was the lowest level since August 2017, according to Fed data.