Foreign Countries selling Treasury Securities - Confusing concept

CFA General
#1

Hi guys, I was reading an article in the WSJ about countries selling their reserves and I have a macro question that is confusing me. Is my train of thought correct here?

Increasing Dollar Value causes countries sell Treasury Bonds to increase demand for their own currency - prop up their currency value.

Increase in Treasury securities supply decreases prices. Yield increases.

Yield increases increase Dollar Value.

Isn’t this an endless cycle of increasing the value of the Dollar? How does selling t-bonds help foreign countries stem the tide of the ever advancing dollar?

#2

i think you can make an argument against every point you listed so your train of though is wrong…

#3

Don’t over think it. The motivation of foreign countries for selling US Treasuries is varied. However, this action depresses the value of Treasuries, and creates supply pressure on USD. Treasuries are just USD that you will receive in the future. If everyone sells Treasuries to receive some foreign currency, it is the same as selling USD in favor of that currency.