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Central banks slow reductions of US Treasuries holdings: Fed data

[NEW YORK] Foreign central banks reduced their US Treasuries ownership more slowly in the latest week, although it was enough to bring their Treasuries holdings at the Federal Reserve to the lowest level in more than a year, Fed data showed.

Holdings of foreign central banks' Treasuries at the Fed fell to US$2.899 trillion on March 25, the lowest since March 19, 2014. A week ago, it was US$2.900 trillion, according to Fed data released late Thursday.

The US$360 million decrease in the latest week was the smallest in the past four weeks.

The modest decline in Treasuries holdings coincided with a further pullback in the greenback after the Fed signaled it was not rushing to raise short-term interest rates.

On Friday, the dollar index, which measures the greenback against a basket of currency, was down 0.03 per cent at 97.405. It has fallen 3 per cent from a 12-year peak set two weeks ago.

Analysts have said some overseas central banks have drawn down their dollar reserves to defend their currency pegs or to stem further depreciation against the dollar.

Foreign central banks' holdings in corporate bonds and other private US debt fell for the first time in six weeks to US$43.63 billion from US$43.72 billion the previous week.

However, those banks' holdings in agency debt and mortgage-backed securities rose to US$284.38 billion from US$283.25 billion in that time.

The Fed's custody holdings of all US bonds for overseas central banks rose for the first time in five weeks to US$3.228 trillion from US$3.227 trillion a week earlier, which was the lowest since March 12, 2014.

Foreign central banks do not keep all their holdings of US bonds at the Fed. There has been speculation that some countries including China have increased their holdings outside of Fed's custody.