Normally, the foreign sector sells Treasuries during a spike in the dollar index, in order to defend their currencies. Then, when the dollar index corrects back down, they re-accumulate the Treasuries that they had sold during the spike.
During this most recent dollar index correction, the foreign sector did not re-accumulate their Treasuries. Around the margins, it has been a more persistent (albeit still small) shift away from Treasuries.
It looks like de-dollarization is happening at the margins and that shows up in the graph.
What does it mean?
So if they don't buy more treasuries, what strategy will they use when the dollar spikes to defend their currency going forward?
Probably many foreign governments planning to implement their own CBDC.
The jig is up
Do we have any idea where that capital is going instead?
Learn a ton from your newsletter Lyn. Reading this feels like sitting in an advanced Economics lecture.
Holy shit Lyn Alden has a Nostr. Why does this not surprise me. You’ve always been one of my financial role models. You speak facts and don’t care what others think.
