India Deepens Shift Away from U.S. Treasuries

India's long-standing holdings of U.S. Treasury bonds have decreased to a low of $174 billion, or down 26%, according to newly released data from the U.S. government. The decrease is part of India's strategy to provide support for the value of the rupee, as well as to diversify its foreign exchange reserve investments away from U.S. dollar-denominated assets.

Currently, treasuries represent 1/3 of India's total foreign exchange reserves, down from 3/4 of total foreign exchange reserves last year. The gold price and gold alternatives are continuing to gain in value as many central banks around the world are re-evaluating their investments.

The decreasing amount of Treasuries held by India is consistent with trending behaviours seen across most of the world's major economies, including China.

Rupee Defence Drives Sales

The Reserve Bank of India is selling Treasuries to finance its own purchase of rupee to bring it back to a more stable price due to the all-time low of the rupee. The delayed U.S.-India Trade Agreement and 50% tariffs on U.S. and Indian goods are putting more pressure on the rupee.

The conflicts between Russia and the U.S. over oil prices are also creating additional price volatility on oil, driving even more currency intervention demand. Concurrently, Foreign Treasury ownership globally has reached an all-time high.

There is currently no public information available from the RBI regarding its sale of U.S. Treasury bonds.

Global De-Dollarisation Context

U.S. sanctions imposed on Russia following the 2022 Ukraine invasion have led to increased diversification into Gold and Silver. India’s Oil imports from Russia are causing increased tensions with the Trump Administration.

China and Brazil have both cut their holdings of the U.S. Treasury Securities to multi-year lows, while at the same time adding to their Gold reserves. Poland will be purchasing an additional 150 tonnes of Gold.

Reserve diversification is intentional, said Finance Minister Nirmala Sitharaman, and Trade deal threats over Greenland have caused additional unease among Reserve Managers.

Broader Reserve Management Shift

RBI has a smaller amount of U.S. Treasury Securities than China, at $683 billion or Japan, at $1.2 trillion. Although Dollar Dominance is still there, alternatives are coming into play.

According to surveys, nearly 60% of Central Banks are looking for alternatives to the U.S. Treasuries within two years. If the Trade Deal progresses, it may stabilise purchases of U.S. Securities, but mass buying appears unlikely.