U.S. DOLLAR SHARE OF GLOBAL FOREIGN RESERVES LOWEST IN 25 YRS: IMF
The US dollar’s share of currency reserves plunged in the fourth quarter last year to its lowest since 1995, International Monetary Fund (IMF) data showed on Wednesday (Thursday, April 1, 2021, in Manila), but some analysts said the drop was due in part to valuation adjustments, Gertrude Chavez-Dreyfuss reported for Reuters.
Global reserves, which are reported in US dollars, are assets of central banks held in different currencies used primarily to support their liabilities. Central banks sometimes use reserves to help support their respective currencies.
The greenback’s share slid to 59% in the fourth quarter, from 60.5% in the third, declining for three straight quarters. Its share in 1995 was 58%. Still, the dollar has the largest share of currency reserves held by global central banks.
It posted a high of nearly 73% share in 2001, data showed. More important, analysts said reserves held in US dollars rose to an all-time peak of $7 trillion in the fourth quarter, compared with $6.939 trillion in the third. Reserves held in euros, meanwhile, rose 7% quarterly to $2.52 trillion.
“The 59% (dollar share) is a statistical noise generated by a combination of valuation and material changes,” said Marc Chandler, chief FX strategist, at Bannockburn Global Forex in New York. “Since reserves are reported in US dollars, so it makes no sense to talk about reserves holdings without taking valuations in account.”
While the dollar value of euro reserves increased 7% in the fourth quarter, the actual holdings, as opposed to the value, rose by a more modest 3% when adjusted for valuation, Chandler said.
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