Not really. This was something I had just been curious about – recent Chinese purchases of US Treasuries (still going up as of July, despite rhetoric), and if there is any relationship in general between relative USD strength and general treasury purchases. There should be no explicit relationship, aside from each time the dollar ticks down against the Yen or Euro someone inevitably comes along with a “they sell all the dollars ahhh!” screed. What does the evidence suggest?

At first glance, there doesn’t appear to be much of a relationship. If anything it’s Japan we need to be worried about, and the imminent threat Japan poses to America’s hegemony hasn’t been news for the last 20 years. Regardless, there are many variables other than relative currency strength that need to be considered when evaluating long term economic health. You could create a more coherent narrative that the USD Index appears to be inversely correlated with total debt issuance by the US government, but that also seems to ignore other variables causal variables – you have to create the debt before anyone can buy it. If the whole system is a myth in the making, it’s not the Chinese one needs to be worried about. They’ve bought in lock, stock and barrel.

Treasury holdings displayed in Billions USD. Data from US Treasury International Capital System.