India Cuts US Treasury Holdings Amidst Tariff Tensions, Diversifies Forex Strategy

• India significantly reduced its investment in US Treasury bonds by 21% from October 2024 to October 2025, falling from $241.4 billion to $190.7 billion.
• This marks the first annual decline in India's US Treasury investment in four years, despite attractive US bond market yields (4.0-4.8%).
• The move signals a strategic shift towards greater diversification of India's foreign exchange reserves, reducing reliance on the US dollar.
• Experts attribute this to a weakening US Dollar Index (DXY), potential US Federal Reserve interest rate easing, and global geopolitical tensions.
• India is exploring alternative investments like gold, other countries' government bonds, and non-dollar currencies, with gold gaining importance as a safe asset.

Why It Matters: India is strategically diversifying its foreign exchange reserves, reducing US Treasury holdings amidst global economic shifts.