According to the latest data released by the U.S. Treasury Department, BRICS member China sold $21.2 billion worth of U.S. bonds and securities in August. This has led to speculation that China is shifting its strategy to protect its weakening currency, the Chinese yuan (CNY).
Since November 2022, the Chinese yuan has reached its lowest point against the U.S. dollar (USD). Notably, the rising value of the USD is a concern for developing countries as it adds additional burden to their import and export sectors.
As a response, China and the BRICS group have been divesting from U.S. Treasury bonds and stocks in the market to protect their respective currencies. Additionally, reports indicate that the Chinese government has been urging state-owned banks to intervene in the currency market on behalf of the People’s Bank of China.
Currently, the BRICS alliance has sold $123 billion worth of U.S. Treasury bonds and stocks in 2023. India and Japan have also joined the divestment efforts to protect their own currencies.
Despite BRICS’ efforts to curb the growth of the U.S. dollar, the greenback remains dominant compared to all other currencies worldwide in October. Specifically, the USD Index reached 106.375 in the global market, marking a 0.31% increase. The interest rates on U.S. 10-year Treasury bonds have reached their highest level in 16 years. The U.S. dollar has benefited from expectations that the U.S. Federal Reserve will maintain higher interest rates for an extended period to combat inflation and return it to its 2% target.
In Vietnam, the exchange rate of VND/USD allowed by commercial banks fluctuates between 23,400 and 25,250 VND/USD. The exchange rate of the U.S. dollar has also been set by the State Bank of Vietnam for trading within the range of 23,400 to 25,250 VND/USD.