U.S. dol­lar share of global cur­rency re­serves hits near 5-year low - IMF

Business a.m. - - WORLD BUSINESS & ECONOMY -

THE U.S. DOL LAR’S SHARE of cur­rency re­serves re­ported to the In­ter­na­tional Mon­e­tary Fund fell in the third quar­ter to a near five-year low, while the euro’s share of re­serves grew to its largest in al­most four years, data re­leased on Fri­day showed.

The Chi­nese yuan’s share of al­lo­cated re­serves shrank for the first time in the third quar­ter since the IMF be­gan re­port­ing its share of cen­tral bank hold­ings in the fourth quar­ter of 2016.

Reuters re­ports that re­serves held in Ja­pa­nese yen reached a 16-year peak in the third quar­ter, IMF data showed.

Global re­serves are as­sets of cen­tral banks held in dif­fer­ent cur­ren­cies, pri­mar­ily used to sup­port their li­a­bil­i­ties. Cen­tral banks some­times use re­serves to help sup­port their re­spec­tive cur­ren­cies.

To­tal al­lo­cated re­serves in­creased to $10.71 tril­lion in the third quar­ter from $10.51 tril­lion in the pre­vi­ous quar­ter.

Re­serves held in U.S. dol­lars rose to $6.63 tril­lion, or 61.94 per­cent of al­lo­cated re­serves, in the third quar­ter, from $6.56 tril­lion, or 62.4 per­cent, in the sec­ond quar­ter. The share of al­lo­cated U.S. dol­lar re­serves de­clined to its small­est since the 61.27 per­cent in the fourth quar­ter of 2013, IMF data showed.

Cen­tral banks ap­pear to fur­ther di­ver­sify their re­serves away from the green­back, which re­mains the world’s dom­i­nant re­serve cur­rency.

The dol­lar edged up 0.5 per­cent against a bas­ket of ma­jor cur­ren­cies in the third quar­ter as a strong U.S. la­bor mar­ket and ex­pec­ta­tions of fur­ther in­ter­est rate in­creases from the Fed­eral Re­serve were off­set by U.S.-China trade ten­sions.

The share of al­lo­cated cur­rency re­serves held in yuan, also known as ren­minbi, slipped to 1.80 per­cent in the third quar­ter from 1.84 per­cent in the prior quar­ter.

The cur­rency of China, the world’s sec­ond big­gest econ­omy , fell 3.8 per­cent on a spot ba­sis against the dol­lar in third quar­ter as the Trump ad­min­is­tra­tion threat­ened to im­pose more U.S. tar­iffs on Chi­nese goods.

While the dol­lar and yuan’s shares of for­eign ex­change re­serves con­tracted, the euro and yen’s shares grew de­spite slug­gish eco­nomic growth in those re­gions.

Ranked sec­ond be­hind the green­back, the euro’s share of global re­serves climbed to 20.48 per­cent, its big­gest since the fourth quar­ter of 2014. It was 20.25 per­cent in the quar­ter be­fore.

The yen’s share of al­lo­cated re­serves ex­panded to 4.98 per­cent, its largest since the third quar­ter of 2002. The Ja­pa­nese cur­rency’s share of re­serves was 4.86 per­cent in the sec­ond quar­ter

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