DXY Pushes Above 100 as Foreign Treasury Holdings Hit Their Lowest Since October

• US dollar gains as Foreign Treasury Holdings fall, while the DXY surged following the latest Fed rate hike and Treasury sell-off
• The DXY breaks above 100 as the Fed rate decision strengthens the dollar and Treasury yields move higher
• Foreign Treasury Holdings fall $50.4B to $9.248T, although broader data shows continued foreign buying of US securities

The US dollar is once again gaining significant momentum as global markets turned around after the recent Fed rate hike. The Federal Reserve has ended up raising interest in the US for the first time in three years. This decision has proven to be beneficial for USD, as it helped raise the DXY index, helping it break the 100 level. However, the US dollar is still being pushed by additional macroeconomic issues. A new data series has pointed out how foreign Treasury Holdings have fallen to their lowest in July, showing contrasting USD perspectives to the global market audience.

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US Dollar Surges After Fed Hike

The US dollar has surged past 100 in a new development, as the Federal Reserve announced its Fed rate hike decision. The agency has ended up raising rates by 25bps, which in turn helped the US dollar steady its pace. This marks the first interest rate hike decision that the Federal Reserve made in approximately three years. Other than that, the markets are also pricing in based on the Fed’s projection, which may include another possible rate hike this year.

Fed chair Kevin Warsh has also spoken on the matter, stating how rising inflation may compel the agency to tighten rates further in the future. The treasury yields have also moved higher alongside the US dollar, with two-year yields hitting 4.7153%.

This combination above has ended up strengthening the US dollar. The DXY index rose to hit 100.3, giving the USD a winning hand against several other currencies.

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Foreign Treasury Holdings Fall $50.4B

While the US dollar has risen following the recent Fed rate hike decision, new data suggests that foreign Treasury holdings have fallen. Foreign-held Treasury securities declined to $9.248T in July, down by $50.4B and marking their lowest level since last October.

The data later adds how France and Canada are accounting for a significant portion of this decline. Both the countries have shed nearly $41.5B and $33.3B, respectively, adding more pressure to the holdings levels. The UK, on the other hand, decided to pursue the Treasury buying, increasing its holdings by $58.4B.

Are Countries Abandoning the US Assets?

The data does show a level of decline in foreign Treasury holdings. But this does not directly refer to US assets being abandoned in totality.

Foreign residents increased their holdings of long-term US securities in July with their net purchases hitting $40.6 billion. Net sales by private foreign investors were $3.7 billion, and net purchases by foreign official institutions were $44.4 billion. The US residents have also increased their holdings of long-term foreign securities, with net purchases of $68.5 billion.

A report shared by the Treasury shows how foreign residents have also made net purchases of long-term US securities in July. The data also shows foreign holdings of Treasury bills increasing by nearly $38.8B. The Treasury’s data is based largely on custodial records, so changes in reported holdings do not always show the full picture of the ultimate owners or their investment decisions.

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