Mubasher: China lowered its holdings in the US Treasuries for the third month in a row last August as Beijing struggled to curb the yuan’s (CNY) further decline amid trade tensions with the US.

The Asian nation’s investments in US bonds, bills and notes totalled $1.165 trillion in August, declining from $1.171 trillion in July, the Treasury Department said in its data on Tuesday.

This came as total foreign holdings of US Treasury holdings rose $35.4 billion to $6.287 trillion during the month.

Japan, the second largest foreign owner of Treasury holdings, trimmed its holdings to $1.03 trillion month-on-month last August from $1.036 trillion.

Meanwhile, Saudi Arabia added $2.7 billion to its holdings to a total of $169.5 billion.

China’s sale of Treasury holdings is generally believed to be a response to the trade conflict with the US. This was echoed in the Chinese ambassador to the US’s suggestion last March that Beijing could lower purchases of the debt in retaliation to the US tariffs.

US President Donald Trump levied since last July tariffs on almost half of products imported from China, to which Beijing replied with duties on American imports.

“Holdings have declined over the past three months and may continue to do so as the ongoing trade war sours the relationship between China and the US and thus reduces their appetite for Treasuries,” Jefferies economist Thomas Simons wrote in a note.

However, the world’s second-largest economy could have allowed a decline in its foreign exchange reserves in a bid to stabilise its embattled currency and cap any further slip.

The yuan already tumbled more than 4% against the US dollar in the past year amid indicators of an economic slowdown and capital outflows.