A man walks by the US Federal Reserve building in Washington D.C., the United States, on July 31, 2019. (Xinhua/Liu Jie)

China may reduce its holdings of US Treasury bonds in response to expectations the US dollar will weaken, analysts said on Tuesday, with new data showing that Japan remained the largest holder of US bonds for a consecutive eight months.

China slightly increased its holdings of US Treasury securities in January by $8.7 billion to a total of $1.08 trillion, the first rise since June 2019, data from the US Treasury Department showed on Monday. In the same month, Japan bought $56.8 billion of US Treasury bonds to reach a total of about $1.21 trillion.

Chinese market analysts predict that Beijing may continue to trim US Treasury bonds in the coming months, as the US Federal Reserve has moved to slash interest rates to zero while launching a massive $700 billion quantitative easing (QE) program, which are certain to undercut the value of the US dollar in the global market.

A recession in the US, affected by the raging coronavirus pandemic in the country, will further depreciate the greenback.

"China is unlikely to ditch US Treasuries on a large scale in the beginning, but that probability depends on how the outbreak of the virus develops in the US," said a Chinese analyst who did not want to be identified.

In a surprise move on Sunday, the US Federal Reserve announced it would cut interest rates by 100 basis points and it launched a $700 billion QE program to shield the economy from the impact of the coronavirus.

In contrast to dollar depreciation expectations, the yuan is forecast to become more stable and its standing as a major international currency will be further elevated, Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Tuesday.

"As the US dollar's international standing weakens at a steady pace, other countries will be willing to hold more yuan," Xi said, noting that China's sound economic fundamentals will support a stronger currency.

When most major economies are scrambling to combat the pandemic and shutting their businesses and schools, China is now shifting its focus to refueling its industrial engine to full capacity in order to make up for economic losses incurred in the past two months.

On Monday, the People's Bank of China, the country's central bank, implemented targeted reserve requirement ratio cuts of 50 to 100 basis points for a wide range of the country's lenders, freeing up to 550 billion yuan ($78.48 billion) in long-term funds for lenders.

At the end of February, China's foreign exchange reserves stood at about $3.11 trillion, down 0.04 percent from the beginning of 2020, data from the State Administration of Foreign Exchange showed.