Over the past few months, the dollar has soared to record highs against many currencies against the backdrop of the Federal Reserve's tightening of monetary policy, causing global financial markets to fluctuate. The surge in global inflation behind the Fed's actions has weakened the value of global bonds. At the same time, it has also accelerated the process of global monetary authorities away from dollar assets. A new change in the matter is that the latest data released by the Ministry of Finance on October 7 showed that Japan's foreign exchange reserves fell by a record $54 billion in September, with foreign exchange reserves of $1.238 trillion, the lowest level since the end of March 2017. The reason is that global market turmoil has weakened the value of foreign bonds and prompted the dollar to sell intervention to prevent a sharp decline in the yen. The market has been speculating that Japan sold U.S. Treasury bonds after the dollar sold intervention after the yen fell sharply against the dollar to a 24-year low.
The latest data from the Japanese Ministry of Finance directly support this assumption and further demonstrate that Japan is selling record U.S. Treasury bonds. A week ago, the Bank of Japan's spending on the market intervened at a record 2.8 trillion yen ($19.32 billion).
In emerging markets, India is also selling US dollar assets significantly. A new change to things is that , as the Indian rupee fell below 82 to a record low this week, the rupee last traded at 82.2675 on October 7, down from 81.88 on the previous trading day, but broke from the intraday low of 82.33. Traders said the rupee fell to 82.33 within ten minutes of opening and has been in range since then, possibly due to the intervention of Reserve Bank of India , which could sell the dollar through state-owned banks. It is reported that four Indian bankers and a brokerage firm have confirmed the intervention of the RBI.
A banker said, "Basically, the RBI is making people feel its existence and again letting traders know that it will not allow one-sided moves." "Intervention will have a certain impact, that is, it will not let the rupee fall further, but it will not help the rupee rebound sharply."
It should be said that the developed market symbolized by Japan and the emerging market symbolized by India are both dissatisfied with the US dollar. As 50 years ago, former US Treasury Secretary Connery said, "The US dollar is our currency, but it is your trouble." The Fed's super radical interest rate hike this year, is still using the US dollar to continuously harvest global currency and wealth interest rate spread .
is also based on this. While selling US dollar assets, Japan and India have also begun the process of formal de-dollarization. The Bank of Japan has joined forces with the European Central Bank, Bank of England , Bank of Canada, and the Swiss National Bank several weeks ago to form a cryptocurrency group trying to bypass the US dollar.
While the Bank of Japan has significantly sold US Treasury bonds, the Japanese pension fund, , Japan Bank fund, which is famous in the investment field, has also shorted US Treasury bonds for at least six consecutive months. Since this year, these Japanese institutions have sold US Treasury bonds of at least about US$220 billion. It is worth mentioning that a Japanese pension insurance company said, "Since May this year, we are increasing our holdings of Chinese government bonds."
At the same time, India has been purchasing bulk commodities from Russia since this year using RMB, ruble and other non-dollar currencies. Although the US economy has been dissatisfied with India's above-mentioned economic and trade and currency transactions, India still chose to directly draw its sword to the US dollar, and India has been continuously purchasing Russian energy commodities.
It is worth mentioning that according to data released by China State Administration of Foreign Exchange on October 7, as of the end of September 2022, China's foreign exchange reserves were US$3029 billion, a decrease of US$25.9 billion from the end of August, a decrease of 0.85%. Analysts believe that compared with the sharp decrease in foreign exchange reserves of many countries such as Japan and India, China's foreign exchange reserves have decreased slightly against the background of further increase in the index of , and the overall balance remains.
At the same time, we also noticed that although the US dollar has continued to strengthen recently, the internationalization process of the RMB is accelerating. In addition to the aforementioned Japan and India began to favor the RMB, the data on "Composition of Official Foreign Exchange Reserve Currency (COFER)" released by International Monetary Fund (IMF) on September 30 showed that in the second quarter of this year, the RMB accounted for 2.88% of the global foreign exchange reserves, the same as the first quarter of 2022, ranking fifth in the world, maintaining the highest level since the IMF began to release RMB reserve assets related data in 2016. The process of internationalization of the RMB is progressing steadily.
Signs indicate that more and more countries around the world are constantly approaching the RMB. For example, in Vietnam, , at least 7 provinces can use RMB to settle related goods or services. Vietnamese businessman Chen Long (sound) said: "If the RMB is legalized in Vietnam and can be used freely, it will be more convenient for Vietnamese companies.
. According to an earlier report by the IMF, Russia, Brazil , Switzerland , Mexico , Israel, Chile and South Africa are constantly increasing RMB reserves while reducing US dollar assets. The latest change in the matter is that Russia's foreign reserve system is also considering purchasing international currency reserves worth RMB 70 billion.
What is more noteworthy is that starts this year The Israeli central bank's foreign exchange reserves have expanded from the US dollar, euro and pound to include the Canadian dollar and Australian dollar, as well as the Japanese yen and renminbi. The US financial website Zero hedge said that the Israeli central bank has made the biggest adjustment in more than a decade to its reserve allocation, and Israel sold the US dollar in exchange for the RMB, which attracted people's attention. Israel seems to be catching up with meaningful changes in the global monetary pattern. Based on Israel's intimate ties with the Federal Reserve and Wall Street over the past half century, Israel's currency changes have some wind meaning.
Zero hedge further stated that it hopes other countries can follow Israel's practice of selling the US dollar in exchange for the RMB. And through the aforementioned Japan And India's currency changes, it can be seen that Japan and India are indeed following Israel. And things are far more than that. In developed Western markets, the Central Bank of New Zealand has also announced an annual revision of the New Zealand dollar trade weighted index. The results show that the RMB has now replaced the Australian dollar and become the largest currency in the New Zealand dollar trade weighted index, with a proportion rising to 22.9%.
. In the UK, the British have continued to favor the RMB in the past few years. According to the report of "London RMB Business Quarterly Report", in 2021, the average daily trading volume of London offshore RMB foreign exchange was 81.43 billion pounds, an increase of 7.03 over 2020. %. In 2021, the total RMB clearing amount was 11.87 trillion yuan, an increase of 17.87% over 2020. data also shows that UK once reached 38.65% of RMB foreign exchange transaction share, and offshore RMB payment share once accounted for 7.76%, of which, the RMB foreign exchange transaction volume of companies that absorb deposits from non-British residents accounted for 34.4%.
Not only that, German Central Bank , French Central Bank, Italian Central Bank and the European Central Bank officially announced that it would increase the RMB as foreign exchange reserves several months ago, which further shows that many developed countries that also have reserve currencies pay more attention to the RMB. In response, analysts from the German Central Bank said that this is determined by the objective situation of the world economy. (End)
