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Updated 10:06 16/05/21

China and Japan dump billions of U.S. dollars

By Duncan Richardson, News Editor

11 Dec 2015

In recent years the mighty dollar has been viewed as the ultimate safe haven asset. When financial assets come under pressure, investors flock back to the U.S. dollar not because the U.S. economy is strong, but because it’s perceived as the lesser of many evils.

However, recent selling by China and Japan suggests the rally may be coming to an abrupt end. In November China sold $87 bn of U.S. treasury’s and since June 2014 have sold have half trillion dollars mostly dominated in U.S. treasury’s. Like China Japan is also reducing its U.S dollar exposure. Last month they sold 1% of their holdings and over the last four years has reduced its holding by 6%.

Although the reduction in percentage terms is small, the rate of selling is accelerating. This suggests there is a growing urgency to ditch the dollar.

China and Russian have openly criticised the global dollar standard and are building alternative payments systems and institutions to challenge the dollars dominance.

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