Purchases of U.S. Treasuries by foreign central banks have been on a downward trend since March but the August figures, released this week, should show a pick-up in demand, according to Sean Callow, currency strategist at IDEAglobal. Foreign central banks purchased about $4 billion in Treasuries in July—a paltry sum compared to the $40 billion they bought in March. Today’s stats for the month of August should show an increase back up to $15 billion, Callow predicted.
However, demand from Japan, the world’s largest buyer of Treasuries, may be more modest in the long term due to a stabilizing of its foreign currency reserves, according to research by Wrightson ICAP. Japan’s dollar reserves held in bank deposits were at 23% when it was most involved in currency intervention, but have held steady at 15% for the past two months, according to the firm. Japan last announced an intervention in the currency market in March.
Japan held nearly $696 billion in Treasuries in July 2004, while China, the second-largest buyer, held almost $167 billion.
