Central banks shift back to dollars, IMF data show
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Holdings of U.S. dollars by foreign central banks bounced back to more "normal" levels in the third quarter, according to data released Wednesday by the International Monetary Fund.
The IMF's Composition of Official Foreign Exchange Reserves data, known as COFER, is reported voluntarily by 140 countries. Of those who report their holdings, adjusted for currency valuation effects, the share of U.S. dollars bounced up to 62% in the third quarter after an unusual drop to 37% in the previous period, according to Barclays Capital.
This is a reversion to much more normal proportions," said Steven Englander, a currency analyst at Barclays, though allocations to dollars have been closer to 70% as well.
Also of interest was a big jump in allocations to "other currencies" besides the majors, which are broken out, he said. After a rough estimate of the appreciation of unnamed currencies, the incremental share was 20-25%, he said. It's still a small portion of the overall holdings but "a disproportionate share of the increase overall," Englander said.
Central banks were "unenthusiastic about any of the G3 at the valuations that prevailed in Q3 and their diversification into small currencies probably represented a significant part of the impetus these currencies experienced," Englander said.
Corrected for valuation effects, the incremental share allocated in euro fell back to 20% from 55% in the previous quarter, according to Barclays. The share of Japanese yen declined to 2% from 12%. See IMF's COFER report.
The dollar has been under pressure throughout the year, in part due to concerns that foreign official investors want to diversify their large reserve holdings away from the U.S. currency as the federal government's deficit has grown rapidly.
The dollar index /quotes/comstock/11j!i:dxy0 (DXY 77.51, -0.40, -0.52%) , a measure of the greenback against a basket of major currencies, is headed for a 3.8% loss in 2009. See more in currencies column.
The euro is on pace for a 2.6% return versus the greenback this year.
Deborah Levine is a MarketWatch reporter, based in New York.
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Holdings of U.S. dollars by foreign central banks bounced back to more "normal" levels in the third quarter, according to data released Wednesday by the International Monetary Fund.
The IMF's Composition of Official Foreign Exchange Reserves data, known as COFER, is reported voluntarily by 140 countries. Of those who report their holdings, adjusted for currency valuation effects, the share of U.S. dollars bounced up to 62% in the third quarter after an unusual drop to 37% in the previous period, according to Barclays Capital.
This is a reversion to much more normal proportions," said Steven Englander, a currency analyst at Barclays, though allocations to dollars have been closer to 70% as well.
Also of interest was a big jump in allocations to "other currencies" besides the majors, which are broken out, he said. After a rough estimate of the appreciation of unnamed currencies, the incremental share was 20-25%, he said. It's still a small portion of the overall holdings but "a disproportionate share of the increase overall," Englander said.
Central banks were "unenthusiastic about any of the G3 at the valuations that prevailed in Q3 and their diversification into small currencies probably represented a significant part of the impetus these currencies experienced," Englander said.
Corrected for valuation effects, the incremental share allocated in euro fell back to 20% from 55% in the previous quarter, according to Barclays. The share of Japanese yen declined to 2% from 12%. See IMF's COFER report.
The dollar has been under pressure throughout the year, in part due to concerns that foreign official investors want to diversify their large reserve holdings away from the U.S. currency as the federal government's deficit has grown rapidly.
The dollar index /quotes/comstock/11j!i:dxy0 (DXY 77.51, -0.40, -0.52%) , a measure of the greenback against a basket of major currencies, is headed for a 3.8% loss in 2009. See more in currencies column.
The euro is on pace for a 2.6% return versus the greenback this year.
Deborah Levine is a MarketWatch reporter, based in New York.