Monday, March 31, 2008

USD is still the main reserve currency

source: IMF

Today the IMF released its preliminary report on Currency Composition of Official Foreign Exchange Reserves (COFER) for 4Q07. To much surprise the amount of USD has not changed on a sequential basis and also not on year over year basis. At the end of last quarter 64% were allocated in USD that compares to 65.5% from a year ago. The amount of euros also changed slightly from 25% to 26% on a year over year basis. Although the report does not break down the currency composition of foreign reserves in different countries it breaks out the numbers for developing countries. The amount of USD in developing countries was 61% at the end of last year unchanged from a year ago. A possible explanation is that many central banks are still buying dollars in an effort to strengthen their own currencies, which helps exports in their mostly supply side economies.

It is interesting to note the rather strange move in the Eur/USD currency cross on the day COFER released its preliminary quarterly report. One could be tempted to speculate that the European central bank used this report as a cover for intervention in the markets. The appreciation in the euro is certainly something that gets a lot of attention and the calls for intervention are getting louder.

source: Currency Composition of Official Foreign Exchange Reserves (COFER)
IMF quarterly publication

No comments: