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Chinese Offshore Yuan Weakens on Entities Selling of Treasurys futures to Prevent a rapid Depreciation - Alldamoney

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Chinese Offshore Yuan Weakens on Entities Selling of Treasurys futures to Prevent a rapid Depreciation



The pace at which China is selling U.S. Treasuries since this year have drawn the question, is the Federal Reserve set to hike its benchmark interest rate?




Its holdings of U.S. Treasuries fell to the lowest level since November 2012, the Asian giant  had its $1.19 trillion in bonds, notes and bills in August, down $33.7 billion from the previous month, the biggest drop since 2013, according to U.S. Treasury Department data released Tuesday in Washington and  figures compiled by Bloomberg.
China sold an estimated $570 billion in foreign-exchange assets from August 2015 to August 2016.

The uncertainty caused by the surprise U.S. Presidential election win by Donald Trump and expectations of a Fed rate hike in December has put pressure on the yuan. Causing the dollar index, which measures the greenback against a basket of currencies, rising this week it closed at 101.67 on Wednesday, the highest level since January 2003.

Reports indicate that Chinese entities were behind the selling of Treasurys futures in order to support the Yuan to prevent a rapid depreciation that would hurt the global economy, bringing the offshore yuan rate to a record low of 6.9441 against the dollar according to a Reuters report. And the intervention could increase if sentiment towards the currency continues to sour and capital outflows accelerate.
People's Bank of China (PBOC) which in 2005 launched a managed float of its currency, but since 2014 has allowed the yuan to move within a 2 percent band around the daily fix set the yuan midpoint against the dollar at 6.9085, on Thursday the weakest since June  2008.


Also Japan, the second largest holder, saw its portfolio fall for the first time in three months, down $10.6 billion to $1.14 trillion. Saudi Arabia’s holdings of Treasuries also declined for a seventh straight month, to $93 billion.

Trump took China to task for what he said was unfair trade prospects, including manipulating the yuan lower to favor the country's exports during his campaign,
And in response Zhang Xiangchen, China's deputy international trade representative on Wednesday, in Washington said the country would rely on World Trade Organization tariff rules on market access if Trump made good on threats to levy punitive duties on goods made in China, as reported by Reuters.

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