China has been dethroned by Japan as the top holder of US government debt as the Chinese central bank has dipped into its foreign exchange reserves to support the yuan, while its Japanese counterpart has been content to allow the yen to weaken. Reuters reports investors are paying close attention to declines in China’s holding of US Treasuries as any sharp sell-off could add further upward pressure to US interest rates, which in turn can undermine the Chinese currency. Figures for foreign ownership of US Treasuries in October released late Thursday in Washington confirmed the shift, with China’s stock of US federal debt plunging to the lowest in more than six years. In October, China’s holdings of US Treasuries fell by $41.3 billion to $1.115 trillion – the more important November and December figures will be released next year.
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