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Foreign Central Banks Dump Treasuries as Middle East Crisis Roils Markets

Foreign governments significantly reduced their U.S. Treasury holdings in March as geopolitical tensions escalated. The U.S.-Iran conflict sparked a surge in crude oil prices that weakened the yen and other regional currencies. China's Treasury stash fell to $652.3 billion, marking the lowest level since September 2008. Japan, the world's largest foreign holder of U.S. government debt, divested approximately $47 billion. Central banks sold dollar-denominated assets to defend local currencies against energy shocks. Import-dependent Asian economies faced particular pressure. HSBC's chief Asia economist noted that central banks sold Treasury holdings to stabilize exchange rates. Market stress prompted portfolio adjustments across the sector. April data, expected next month, will reveal how aggressively policymakers continue supporting their currencies.