BRICS nations cut $18.9 Billion in US treasuries — What’s the impact?

Recent data from the U.S. Treasury Department reveals a significant move by members of the BRICS economic alliance—Brazil, Russia, India, China, and South Africa. China, the world’s second-largest holder of U.S. treasuries, has notably reduced its holdings from $835.4 billion in June to $821.8 billion in July. This marks a decline of $13.6 billion in just one month. Additionally, over the past year, China has offloaded about $117.4 billion worth of U.S. government debt.

Other BRICS members follow suit

Brazil, another key player in the BRICS alliance, has also trimmed its U.S. treasury holdings. The South American nation’s treasury stash declined from $227.4 billion in June to $224.7 billion in July, a decrease of about $2.7 billion.

India followed a similar path, reducing its holdings by $2.3 billion over the same period. Meanwhile, the United Arab Emirates, although not a BRICS member, saw its U.S. treasury holdings drop by $300 million, from $65.2 billion in June to $64.9 billion in July.

According to a report from Nikkei Asia, China is also cutting back on its U.S. treasuries to defend the yuan against a strong U.S. dollar. The Chinese yuan recently fell to $0.136 versus the U.S. dollar, a level last seen in January 2008. 

When countries sell U.S. treasuries, the proceeds often serve as capital for the nation’s central bank to accumulate local currency on the open market, thereby boosting its value.

Besides the economic implications, this trend could have geopolitical ramifications. The BRICS nations are increasingly looking to diversify their portfolios, possibly as a hedge against U.S. economic policies. Moreover, these nations’ decline in U.S. treasury holdings could impact the U.S. government’s ability to finance its debt, leading to broader questions about the dollar’s role as the world’s reserve currency.

However, it’s worth noting that the U.S. treasury dump by BRICS nations comes at a time when the global economy is undergoing rapid changes. Trade tensions, geopolitical shifts, and the ongoing impact of the COVID-19 pandemic are all contributing factors. 

The shedding of U.S. treasuries by these countries could be a harbinger of more significant economic changes to come by the BRICS nations in the future. 

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