March 31, 2010
US dollar share of Q4 global FX reserves rises - IMF
The IMF data, which covers about two-thirds of the world's foreign exchange reserves, showed the dollar's share of the roughly $4.6 trillion allocated reserves rose to $2.8 trillion.
The greenback in the third quarter of 2009 had a share of 61.5 percent. In the second quarter of 2001, the dollar share was 73 percent.
Marc Chandler, global head of FX strategy at Brown Brothers Harriman in New York, said the dollar's share of global reserves is likely to increase in the first quarter as well, given the euro's decline of almost 5.7 percent against the greenback during the period and a 6.3 percent fall in sterling.
"The dollar's share is going to rise further because investors are getting away from the euro. Your central bankers usually begin the year with half of its reserves in dollars and half of it in euros," said Chandler.
"Over the course of the year, the dollar goes up in value so your euros are going to be worth less than 50 percent. Once you go through the math, it's clear that the dollar's appreciation is going to lower the value of the non-dollar reserves."
The IMF estimates that at the end of 2009, global reserves stood at $8.1 trillion, up from $7.9 trillion in the previous quarter.
Of the allocated reserves, the euro's share slipped to 27.4 percent from the third quarter's 27.8 percent share. The euro had accounted for about 18.1 percent of allocated reserves at the end of the first quarter of 1999 when it was first launched.
The yen's share slipped to 3.0 percent from 3.2 percent in the previous period while sterling's share was steady at 3.2 percent.
Meanwhile, unallocated reserves, in which China accounts for the bulk, rose to $3.5 trillion in the fourth quarter from $3.4 trillion previously.
While China is said to be diversifying away from U.S. assets, the country reportedly holds 65 percent to 75 percent of its reserves in U.S. dollars.
Emerging market holdings increased to $5.4 trillion from $5.2 trillion in the third quarter.
The IMF data provides only limited insight into shifts in the composition of central bank holdings because it doesn't show one-third of the world's reserves.
AP
