August 15, 2018 / 10:03 PM / 3 months ago

Some emerging markets pare U.S. Treasury holdings in June -data

NEW YORK, Aug 15 (Reuters) - Some emerging market countries pared their holdings of U.S. Treasuries in June, data from the U.S. Treasury department showed on Wednesday, in what analysts viewed as a move to support their currencies as the Federal Reserve started raising interest rates this year.

Turkey, India, Mexico, China, Thailand, and Taiwan reduced their holdings in June. Russia’s Treasury holdings were steady during the month at $14.9 billion, but down more than 80 percent from its holdings in March.

The June figures represent holdings of these countries before the flare-up of Turkey’s situation.

“Emerging markets have started to shed their holdings of Treasuries,” said Gennadiy Goldberg, senior rates strategist at TD Securities in New York, which could be a way to prop up their currencies.

“A lot of these countries use Treasuries as a way to invest their dollar assets and when their currencies come under pressure, they sell those holdings to defend their currencies,” he added.

The MSCI Emerging Market Currency Index is down 5.4 percent since the beginning of the year.

U.S. Treasury holdings by Turkey, currently embroiled in a political and trade conflict with the United States, dropped to $28.8 billion in June, from about $32 billion in May. Turkey’s Treasury holdings have declined for eight straight months.

The lira has lost about 36 percent of its value against the dollar amid concerns about Turkey’s worsening relations with the United States.

China’s holdings of Treasuries fell slightly to $1.178 trillion in June, from $1.183 trillion in May. China remains the largest non-U.S. holder of Treasuries.

India’s holdings fell to $147.3 billion in June from $148.9 billion the previous month, dropping for a third straight month.

Taiwan’s holdings slid as well to $162.5 billion in June, from $164.8 billion, falling every month this year.

Thailand’s holdings dropped to $58.6 billion, from $62.2 billion in May, down for a second straight month.

Argentina’s Treasury portfolio was steady at $4.5 billion, but its currency, the Argentinian peso, has been one of the underperformers this year, down more than 36 percent against the dollar.

As the peso weakened, Argentina sold 23.1 billion pesos ($769.63 million) in Treasury notes on Wednesday, the Treasury Ministry said in a statement, split between 14.2 billion pesos in 105-day notes and 8.9 billion pesos in 224-day notes.

Reporting by Gertrude Chavez-Dreyfuss Editing by Chris Reese

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