Forex Blog: Currency Trading News & Analysis.

July 2nd 2007

Central Banks Continue to Hold USD

Several months have now passed since China announced that it had created a state agency to oversee the investment of its foreign exchange reserves, the bulk of which are held in USD-denominated assets.  It now appears that the ensuing hysteria, which speculated that China would begin diversifying its reserves into other currencies, was overblown.  The same applies to speculation that other countries would follow suit.  In fact, the International Monetary Fund (“IMF”) announced today that fully 65% of the world’s forex reserves ($2.24 trillion) are still held in USD, which represents a 4% increase over last year. In short, the data suggests that all of the talk surrounding a shift away from the USD did not really translate into much action. The Economic Times reports:

Emerging market countries…are thought to be the main dollar holders. High oil prices bring dollars flooding into the Middle East, while in China’s case, intervention to keep the yuan weak keeps export revenues pouring into Beijing’s coffers.

Read More: Move away from dollar reserves still all talk

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Posted by Adam Kritzer | in Central Banks, US Dollar | No Comments »

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