Nov. 24 – India and China are pulling back on investments in U.S. treasury bonds since this year on rising concerns over a weak U.S. dollar and the necessity to vary foreign exchange assets.

Data from the U.S. Treasury Department shows India decreasing exposure to U.S. treasury bonds by almost 8 percent from June to September 2009 to US$35.9 billion. The United States largest investor in U.S. treasuries, China, has also slowed down its pace of investment. From September 2008 to March 2009, China bought close to US$150 billion in U.S. treasuries but since April of this year, it has dropped purchases to US$30 billion.

India and China have started to slow down on acquisition of U.S. treasuries at a time when both the countries are witnessing a sharp surge in capital inflows reports The Economic Times.

Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria and the Caribbean offshore banking centers have also decreased U.S treasury bond exposure.

Early this month, India bought 200 metric tons of gold from the International Monetary Fund worth US$6.7 billion signaling that it is diversifying its holdings. The amount of gold is massive and represents 8 percent of annual global gold mine production; making India the ninth-biggest government gold owner in the world.

“The fall in the U.S. dollar seems to be pushing all the central banks to strengthen their portfolio with gold,” N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy in New Delhi told Bloomberg. “Gold is a safe store of value compared to the U.S. dollar.”