USD/CNY: China may route Treasuries via Canada, easing US debt demand fears

Market talk is growing, according to a Bloomberg report, that China may be routing part of its US Treasury holdings through Canada. The source reports no price move, pip figure or technical levels. The theory matters because a steady Chinese exit from Treasuries is one of the market's recurring worries. If China's holdings are more stable than official figures suggest, that worry would carry less weight, which could ease some concern about foreign demand at US debt auctions. The report also shows how headline foreign holdings data can mislead traders. A monthly decline attributed to China may reflect assets shifting to holdings recorded under another country, such as Canada, rather than outright selling. For USD traders, the takeaway is to treat drops in China's reported Treasury holdings with caution before reading them as a bearish signal for the dollar or US debt demand. Shifts in holdings attributed to Canada may also deserve closer scrutiny in future releases.