July 26, 2018 / 9:50 PM / 5 months ago

Foreign U.S. bond holdings at Fed steady despite strong dollar

July 26 (Reuters) - Foreign central banks’ holdings of U.S. Treasuries at the Federal Reserve held firm in the latest week even as the dollar hovered at its strongest level in over a year, Fed data released on Thursday showed.

The U.S. central bank’s custody holdings of U.S. government debt securities for overseas central banks totaled $3.036 trillion on July 25, little changed from $3.035 trillion the week before, according to Fed data.

Back on March 14, foreign official ownership of Treasuries at the Fed reached $3.109 trillion, which was the most on record.

On July 19, the dollar reached its highest level against a basket of currencies since July 14, 2017 on signs of solid economic growth and safe-haven demand due to worries about trade frictions between the United States and its major trade partners.

Asian currencies have been hard hit the past two weeks as the Trump administration has ratcheted up its call for more tariffs against China.

The Chinese yuan has weakened about 1.48 percent in the past two weeks. The Korean won and Indonesian rupiah also have fallen against the dollar.

Overseas central banks could pare their U.S. Treasuries holdings when the dollar strengthens to defend their currencies in a bid to stem capital outflows.

On the other hand, they could buy more Treasuries to help lower the value of their currencies against the dollar.

A Reuters poll released on Thursday showed investors raised bearish bets on all emerging Asian currencies.

Foreign central banks can keep their U.S. bond holdings outside the Fed.

Reporting by Richard Leong; editing by Diane Craft

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