Forget the Cold War, or World War III, are you ready for the currency war? There are reports (though not yet confirmed) that Russia is transferring billions of dollars and assets offshore.
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The Fed’s custody holdings report is usually a sleeper, but this week there was a whopping withdrawal by some central bank. And while there’s no evidence, speculation is that it was Russia.
Foreign central banks’ holdings of U.S. marketable securities fell in the week that ended Wednesday by $106.1 billion, and that was mostly Treasurys. The holdings of U.S. securities held by the Fed for other central banks fell to $3.21 billion, the lowest level since December 2012.
While traders say they suspect it was Russia, they don’t know for sure, and it has not shown up on Russia’s balance sheet.
However, Marc Chandler, chief Treasury strategist at Brown Brothers Harriman, said everything points to Russia, starting with the timing of Sunday’s Crimean referendum and the potential for Western sanctions. He said rather than selling the Treasurys, Russia simply transferred them out of the U.S.