India’s Shift: Offloading US Bonds, Increasing Gold Holdings
The Reserve Bank of India (RBI) is significantly reducing its holdings of US Treasury bonds, reaching a five-year low as part of a strategy to support the rupee and diversify foreign exchange reserves. This move mirrors similar actions by other major economies and reflects concerns about US sanctions risks and the weaponization of the dollar, leading to a shift towards assets like gold. India’s actions are also influenced by trade tensions with the US, contributing to a decline in the rupee’s value and the need for RBI intervention. While the dollar remains the dominant global reserve asset, this trend of diversification is expected to continue, with many central banks planning to explore alternatives in the coming years. Analysts suggest that even if trade tensions ease, this shift toward alternative assets is likely to stabilize rather than reverse.
John Q. Hosedrinker