Core Viewpoint - The article discusses the decline of the US dollar's share in global foreign exchange reserves, highlighting a trend towards a multipolar international reserve currency system, with the dollar's share dropping to a 30-year low of 56.32% as of the second quarter of this year [1][11]. Group 1: Dollar Reserve Share Dynamics - As of the end of Q2, the dollar's share of global foreign exchange reserves fell from 57.79% to 56.32%, a decrease of 1.47 percentage points, marking the 11th consecutive quarter below 60% [1]. - The decline in the dollar's share is attributed to a 7.1% depreciation of the dollar index during the same period, indicating a negative valuation effect [1][3]. - The IMF's article on the same day emphasized that the dollar's reserve share remained stable when adjusted for exchange rates, suggesting that the decline was primarily due to valuation losses rather than a fundamental shift in reserve preferences [3]. Group 2: Euro and Other Currencies - The euro's reserve share increased from 20% to 21.13%, a rise of 1.13 percentage points, but this was largely due to a 9% appreciation against the dollar, which masked a potential decline in its reserve share if exchange rates had remained stable [3][4]. - The article argues that the focus on exchange rate effects overlooks the positive impact of asset price revaluation on the dollar's reserve share [4]. Group 3: US Long-term Securities and Foreign Holdings - As of June, foreign official holdings of US long-term securities (excluding international organizations) amounted to $67,395 billion, closely aligning with the IMF's reported global dollar reserves of $67,733 billion [4]. - The TIC report indicates that foreign official investors held $38,191 billion in US Treasury securities, $5,078 billion in agency debt, $2,185 billion in corporate bonds, and $21,941 billion in US equities, with equities representing over 30% of total holdings [4]. Group 4: Market Trends and Investment Behavior - The US stock market experienced significant volatility, with a 4.8% decline in Q1 followed by an 11% rebound in Q2, impacting the valuation of US equities held by foreign officials [6]. - In Q1, foreign official holdings recorded a valuation loss of $197 billion, while Q2 saw a valuation gain of $2,152 billion, indicating the substantial influence of market fluctuations on reserve valuations [6][8]. - In Q2, net purchases of US long-term securities by foreign officials fell to $51 billion, a 94.4% decrease from the previous quarter, highlighting a shift in investment strategy towards equities and away from safer assets like US Treasuries [8]. Group 5: Trends in Global Reserve Currency System - The article notes a continuing trend towards the diversification of the international reserve currency system, often associated with "de-dollarization," which refers to reducing reliance on the dollar in international trade and finance [12][20]. - Despite the decline in the dollar's share, the article suggests that the dollar's dominance remains resilient, as evidenced by its continued high percentage in global foreign exchange transactions [21].

Core Viewpoint - The International Monetary Fund (IMF) has reported a decline in the dollar's share of global foreign exchange reserves, indicating a trend towards a more multipolar international reserve currency system, with the dollar's share falling to a 30-year low of 56.32% as of the end of Q2 [1][11]. Group 1: Dollar Reserve Share Decline - The dollar's share of global foreign exchange reserves decreased from 57.79% to 56.32%, a drop of 1.47 percentage points, marking the 11th consecutive quarter below 60% [1]. - The decline is attributed to a 7.1% depreciation of the dollar index during the same quarter, which contributed to a negative valuation effect [1][2]. - If exchange rates remained stable, the dollar's reserve share would have only slightly decreased to 57.67%, a drop of 0.13 percentage points [2]. Group 2: Euro's Performance - The euro's reserve share increased from 20% to 21.13%, a rise of 1.13 percentage points, but this was largely due to a 9% appreciation against the dollar, which masked the actual change in reserve share [2]. - Without the exchange rate effect, the euro's reserve share would have decreased by 0.04 percentage points to 19.96% [2]. Group 3: U.S. Long-term Securities Holdings - As of June, official foreign assets (excluding international organizations) held $67,395 billion in U.S. long-term securities, closely aligning with the IMF's reported global dollar reserve balance of $67,733 billion [5]. - The breakdown of these holdings includes $38,191 billion in U.S. Treasury securities (56.7%), $5,078 billion in government agency debt (7.5%), $2,185 billion in corporate bonds (3.2%), and $21,941 billion in U.S. equities (32.6%) [5]. Group 4: Market Dynamics and Valuation Effects - The U.S. stock market experienced significant volatility, with a 4.8% decline in Q1 followed by an 11% rebound in Q2, impacting the valuation of U.S. equities held as dollar reserves [8]. - In Q1, official foreign assets recorded a valuation loss of $19.7 billion, while in Q2, they saw a valuation gain of $2,152 billion, indicating a strong influence of asset price fluctuations on reserve valuations [8]. Group 5: Trends in International Capital Flows - In Q2, official foreign assets net purchased $51 billion in U.S. long-term securities, a 94.4% decrease from the previous quarter, highlighting a shift in investment strategy [9]. - The net buying of U.S. equities increased to $237 billion, while U.S. Treasury securities saw a net selling of $66 billion, indicating a preference for riskier assets over safe-haven investments [9]. Group 6: Global Reserve Currency Dynamics - The trend towards a multipolar currency system is linked to the concept of "de-dollarization," which involves reducing reliance on the dollar in international trade and finance [11]. - Despite the decline in the dollar's reserve share, it remains dominant in global foreign exchange transactions, accounting for 89.2% of daily trading volume as of April [19].

Core Points - The U.S. dollar index (DXY) fell by 10.8% in the first half of the year, marking the largest decline since 1973, despite significant net capital inflows into the U.S. [1][2] - The decline in the dollar index is attributed to marginal changes in international capital flows rather than a direct correlation with foreign investment in U.S. securities [2][3] - New trade agreements initiated by the U.S. government are expected to reduce the attractiveness of U.S. securities for foreign investors, potentially undermining the dollar's status as a reserve currency [1][12][14] Capital Flow Analysis - In the first half of the year, the U.S. attracted a net capital inflow of $767.7 billion, a 2.78-fold increase year-on-year, despite a significant drop in the dollar index [2][3] - The net inflow decreased by $200.8 billion (20.7%) compared to the second half of the previous year, primarily due to a reduction in private foreign investment [2][3] - Private foreign investment decreased by $325.8 billion, contributing to a 162.3% drop in net capital inflow, while official foreign investment shifted from a net outflow to a net inflow of $1.08 billion [2][3] Securities Investment Trends - Foreign investors did not significantly reduce their holdings of U.S. securities but instead decreased their cash holdings in dollars while increasing investments in foreign securities [3][4] - Foreign investors net purchased $941.9 billion in U.S. securities, a record high for the first half of the year, with a notable increase in U.S. Treasury purchases [3][4] - There was a marked decrease in purchases of U.S. corporate stocks, reflecting a reduced risk appetite among foreign investors due to U.S. economic and trade policy uncertainties [4][5] Official Foreign Investment Insights - Official foreign investment in U.S. Treasury securities saw a significant turnaround, moving from a net sell of $57.6 billion to a net buy of $115.9 billion [5][10] - The overall interest in U.S. Treasury securities among private and official foreign investors showed a stark contrast, with private investors reducing their net purchases [5][10] - The trend indicates that while official foreign investors are increasing their holdings in U.S. Treasuries, private investors are becoming more cautious, particularly regarding U.S. equities [5][10] Impact of Trade Policies - The new trade agreements aim to reduce the U.S. trade deficit, which could lead to a decrease in foreign investment inflows [12][14] - The U.S. government’s aggressive trade policies may negatively impact the dollar's reserve currency status, as effective deficit reduction could lead to reduced capital inflows [12][14] - The structural relationship between trade deficits and capital inflows suggests that a decrease in trade deficits may correlate with a decline in foreign investment in U.S. securities [13][14]

Core Viewpoint - The global tariff storm initiated by the U.S. government may reset the global trade and international monetary systems, potentially undermining the dollar's status as the world's reserve currency [1][15]. Capital Flow Analysis - In the first half of the year, the U.S. attracted a net inflow of international capital amounting to $767.7 billion, a 2.78-fold increase year-on-year, despite a 10.8% decline in the dollar index, marking the largest drop since 1973 [2]. - The marginal changes in capital flow reveal that the dollar's decline is not directly linked to foreign investors selling U.S. securities but rather to a reduction in interest from private foreign investors [2][3]. - Foreign investors did not significantly reduce their holdings of U.S. securities but opted to decrease their cash holdings in dollars while increasing investments in foreign securities [3][4]. U.S. Securities Investment Trends - Foreign investors predominantly increased their holdings in U.S. long-term securities, particularly U.S. Treasury bonds, while significantly reducing purchases of U.S. corporate stocks, indicating a lowered risk appetite due to U.S. policy uncertainties [4][5]. - The net purchase of U.S. Treasury bonds reached $4,278 billion in the first half of the year, marking a historical high for semi-annual net purchases [5]. Official Foreign Investment Dynamics - Official foreign investors shifted from net selling to net buying of U.S. Treasury bonds, contributing positively to the overall net inflow of foreign capital [2][10]. - The interest from private and official foreign investors in U.S. Treasury bonds showed significant divergence, with private investors reducing their net purchases while official investors increased theirs [5][11]. Impact of New Trade Agreements - The new trade agreements aimed at reducing the U.S. trade deficit may adversely affect the dollar's status as a reserve currency, as a decrease in trade deficit could lead to a reduction in foreign capital inflows [12][15]. - The U.S. government's aggressive trade policies may lead to a decrease in foreign investment in U.S. securities, as countries commit to increasing direct investments in the U.S. to promote domestic manufacturing [15].

Core Viewpoint - The rumors regarding foreign capital selling US Treasury bonds are unfounded, as data from the US Treasury's International Capital Movement report indicates that the turmoil in May was not caused by foreign investors [1][2]. Group 1: Market Conditions - In May, global trade tensions eased, with the US's "reciprocal tariff" policy in a 90-day buffer period, leading to a 27.6% month-on-month decline in the US trade policy uncertainty index [1]. - The US government faced increasing criticism of the Federal Reserve, and Moody's downgraded the US's last AAA sovereign credit rating, raising concerns about the Fed's independence and the sustainability of US debt [1]. - The 10-year and 30-year US Treasury yields rose above 4.5% and 5.0%, respectively, with monthly increases of 24 and 26 basis points, resulting in a significant drop in Treasury prices [1]. Group 2: Capital Flows - In April, international capital experienced a net outflow of $146 billion, reversing a net inflow of $171.2 billion in March, coinciding with a 4.4% drop in the dollar index [2]. - In May, the US financial market rebounded, with the S&P 500 index rising 6.1%, leading to a net capital inflow of $311.1 billion, a month-on-month increase of $3.257 billion, marking the third-highest monthly inflow on record [2]. Group 3: Foreign Investment in US Securities - Foreign investors net purchased $318.5 billion in US long-term securities in May, a month-on-month increase of $369.1 billion, contributing 113.1% to the net capital inflow [3]. - Private foreign capital was the main contributor, with a net inflow of $333.2 billion, a month-on-month increase of $330.4 billion, marking the highest monthly net inflow on record [4]. Group 4: Types of Securities - Foreign investors significantly increased their holdings of US Treasury bonds, with net purchases of $1.463 billion in May, a month-on-month increase of $1.871 billion, contributing 50.7% to the net purchases of long-term securities [5]. - Private foreign investors were the primary buyers of US long-term securities, shifting from a net sale of $50.6 billion to a net purchase of $318.5 billion in May [5][6]. Group 5: Country Contributions - Canada was the largest contributor to the net purchase of US long-term securities in May, with a net inflow of $146.7 billion, accounting for 39.7% of the total [9]. - Other significant contributors included the Cayman Islands, Singapore, China, and Japan, with China ending a 10-month streak of net sales to net purchase $3.2 billion in May [10][11].

Core Viewpoint - The analysis of cross-border securities investment between China and the U.S. reveals a significant decline in Chinese investments in U.S. long-term securities, particularly U.S. Treasury bonds, while investments in U.S. company stocks have increased, indicating a shift in investment strategy [1][2][3][4][5][6]. Group 1: Chinese Investment in U.S. Long-term Securities - As of the end of 2024, Chinese investors held $1,309.3 billion in U.S. long-term securities, a decrease of $220.8 billion or 14.4% from the end of 2020, accounting for 4.1% of foreign holdings [2]. - The balance of Chinese holdings in long-term U.S. Treasury bonds was $698.6 billion, down $334 billion or 32.3%, contributing significantly to the overall decline in Chinese long-term securities investments [2][5]. - In contrast, Chinese holdings of U.S. company stocks increased to $375.1 billion, a rise of $113.9 billion or 43.6%, offsetting some of the declines in other areas [3]. Group 2: Changes in Specific Securities - Chinese holdings of U.S. government agency bonds remained relatively stable, with a slight increase of $4 billion or 1.9%, while holdings of U.S. corporate bonds decreased by $4.7 billion or 19.6% [4][6]. - The overall reduction in Chinese long-term securities was influenced by a net reduction of $1,722 billion in U.S. long-term securities, with non-transactional changes accounting for $692 billion [4][6]. Group 3: U.S. Investment in Chinese Securities - As of the end of 2024, U.S. investors held $246 billion in Chinese long-term securities, a decrease of $39.6 billion or 13.9% from the end of 2020, representing 1.6% of U.S. foreign long-term securities holdings [7]. - The primary reason for this decline was a reduction in U.S. holdings of Chinese company stocks, which fell by $21.3 billion or 8.5% [7][9]. - U.S. holdings of Chinese government bonds decreased significantly by $15.6 billion or 52.7%, contributing to the overall decline in U.S. investments in Chinese long-term securities [8][9]. Group 4: Comparative Analysis of Investment Trends - Despite the differences in scale, both Chinese and U.S. investments in their respective long-term securities show similar proportions, each around 2% of their total foreign securities investments [8]. - The data indicates that while U.S. investors have been reducing their exposure to Chinese securities, Chinese investors have been diversifying their investments, particularly increasing their stakes in U.S. equities [12][13].