Market Insider

Was that Russia transferring dollar holdings offshore?

Russian President Vladimir Putin
Sasha Mordovets | Getty Images

The Fed's custody holdings report is usually a sleeper, but this week there was a whopping withdrawal by some central bank. And while there's no evidence, speculation is that it was .

Foreign central banks' holdings of U.S. marketable securities fell in the week that ended Wednesday by a record $106.1 billion, and that was mostly Treasurys. The holdings of U.S. securities held by the Fed for other central banks fell to $3.21 billion, the lowest level since December 2012.

While traders say they suspect it was Russia, they don't know for sure, and it has not shown up on Russia's balance sheet.

Did Russia transfer dollar holdings offshore?
Did Russia transfer dollar holdings offshore?

However, Marc Chandler, chief Treasury strategist at Brown Brothers Harriman, said everything points to Russia, starting with the timing of Sunday's Crimean referendum and the potential for Western sanctions. He said rather than selling the Treasurys, Russia simply transferred them out of the U.S.

"Everything (Russian President Vladimir) is doing is being extra cautious about retaliation, like bringing troops right to the Ukraine border," said Chandler. "The other reason I say it's most likely Russia is you look at the countries that have the largest reserves. It doesn't feel like it's China because China has enough on its plate."

Chandler said about half of Russia's foreign currency reserves are held in dollar-denominated instruments, and this would be about 80 percent of those dollar holdings. At the end of 2013, Russia had $138 billion in Treasury securities.

"It could be somebody else, but it does seem circumstantial just on the timing alone," said Chandler.

He also said there are precedents for this type of behavior by Russia.

He pointed to the birth of the Eurodollar market—dollars outside the U.S. In 1956, when the Soviet Union invaded Hungary, it feared the U.S. would retaliate with financial muscle, and Russia-based Narodny Bank shifted dollars from the U.S. and deposited them in its London branch, he noted.

—By CNBC's Patti Domm. Follow her on Twitter @pattidomm.