Jakarta, CNBC Indonesia – The issue of scarcity of the United States (US) dollar does not only occur in Indonesia, but in the world. As a result, many countries are fighting over it, but on the other hand, China is even more keen to “throw away” US dollars.
This was done to reduce dependence on the US dollar, which is said to be a weapon for the United States to put pressure on other countries, while increasing the use of the yuan as an international currency.
The scarcity of the US dollar was triggered by the central bank’s (The Fed) aggressive move to raise interest rates. Over the past year, the Fed under the leadership of Jerome Powell raised interest rates by 425 basis points to 4.25% – 4.5%, the highest in the last 15 years. The increase was also the most aggressive since the 1980s.
This move made capital flow to the United States, and the US dollar returned to its origins.
Not only that, the Fed also reduced the value of its balance sheet (balance sheet) by selling the bonds (Treasury) they owned. As a result, many US dollars in circulation were absorbed, and a shortage ensued.
This condition is exacerbated by the global economy which is still shrouded in uncertainty, as a result the US dollar is considered a safe asset (safe haven) to be hunted.
“The whole world is fighting over dollars,” said Airlangga Hartarto, Coordinating Minister for the Economy when met at the Presidential Palace, Jakarta, Wednesday (25/1/2023)
In order to increase the domestic supply of US dollars, the government plans to withhold export proceeds (DHE) for 3 months at home.
“Because we have had positive exports for 31 months, we have to manage how foreign exchange needs are available domestically,” said Airlangga.
Various ways have been taken by many countries to increase the supply of US dollars, but China has done the opposite.
Over the past year China has continued to sell its US Treasury holdings. Based on data from the US Ministry of Finance’s Treasury International Capital (TIC), in November 2022, China sold US$ 7.8 billion of its Treasury, bringing it to US$ 870 billion. The value of US debt holdings is the lowest since June 2010.
The sale was carried out almost all of last year, before Treasury was sold for US$ 24 billion. In July 2022, for the first time in 12 years, Chinese Treasury holdings fell below US$1 trillion.
The sell-off began in 2017, when there was a trade war against the United States. The sanctions imposed by the United States and Europe on Russia, which started the war in Ukraine, further strengthened China’s intention to reduce dependence on the US dollar.
At the same time at the end of last year, China bought up gold. The World Gold Council (WGC) on Friday (6/1/2023) reported that China’s central bank (PBoC) bought up 32 tons of gold in November 2022.
The PBOC’s purchase of gold is the first time since September 2019 or more than three years ago.
Then at the end of last week, the PBoC announced the purchase of 30 tons of gold in December 2022. Thus, in two months the PBoC bought up 62 tons of gold.
The move suggests China is reducing the US dollar in its foreign exchange reserves, and adding gold.
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