US dollar's share of global reserves down to a 10-year low

As a result of the European debt crisis and the weak global economic recovery, euros and U.S. dollars are now losing appeal, and their shares of global foreign exchange reserves decreased in various degrees in the first quarter of 2010, the International Monetary Fund (IMF) said on June 30.

Central banks all over the world are diversifying their assets, analysts said.

According to the IMF's data on the currency composition of official foreign exchange reserves, the global official foreign exchange reserves rose to 8.3 trillion U.S. dollars in the first quarter of 2010 from 8.2 trillion U.S. dollars in the fourth quarter of 2009. The U.S. dollar's share of reserves dropped from more than 62 percent in the previous quarter to a 10-year low of 61.5 percent. Meanwhile, the euro's share fell from 27.3 percent to 27.2 percent.

The IMF announces the shares of the U.S. dollar, euro, pounds sterling, yen and Swiss franc separately, but treats other currencies as a whole. The total shares of other currencies increased from 3.1 percent in the previous quarter to 3.7 percent, the highest in 10 years. Analysts said that central banks may have increased the shares of the Canadian dollar, Australian dollar and Norwegian krone in the first quarter.

Some analysts believe that since central banks worldwide reduced their euro holdings in the first quarter of the year, they may continue doing so in the second quarter because of the worsening sovereign debt crisis across the euro zone. The euro has fallen by 14 percent against the U.S. dollar since early 2010, and dropped to a four-year low below 1.9 against the U.S. dollar in June.

Win Thin, a senior currency strategist at Brown Brothers Harriman & Company, said Europe's debt crisis will exert a great impact on the statistics in the second quarter, and that the latest figures are indeed in line with central banks' diversified asset allocation strategies.

By People's Daily Online