say it ain't so!!!!!!!!!!!!!! NO BIGGIE, WE'LL PRINT AND BUYEM BACK. 2 DOLLARS FOR ONE DOLLAR OKAY???
LONDON: Central banks around the world are continuing to diversify their reserves by cutting their dollar holdings, according to a survey sponsored by Royal Bank of Scotland Group.
Italy, Russia, Sweden and Switzerland have made "major adjustments" in foreign-exchange holdings favoring the euro and the pound, according to the poll, which was conducted by Central Banking Publications between September and December 2006.
China also plans to manage its reserves more actively, the report said.
"Central banks are open to saying they've been diversifying to improve returns and reduce exposure to any single currency," said Sean Callow, senior currency strategist at Westpac Banking in Singapore. "There's no doubt that when they say 'diversification' they mean selling dollars."
The survey of official reserve managers controlling $1.5 trillion, or around 30 percent of the global total, found that 40 of the 47 respondents said central banks were not reaching the limits of feasible and practical diversification.
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It also found that many central banks were eager to invest more of their growing reserves into higher-yielding and "nontraditional" assets like stocks and commodities.
Diversification of official reserves could make it more difficult for the United States to finance its current account deficit, the broadest measure of trade in goods and services, and cause yields on U.S. Treasury securities to rise.
The dollar accounted for 65.6 percent of global currency reserves in the third quarter, according to the International Monetary Fund.
The U.S. current account deficit widened to a record $255.6 billion in the third quarter of last year, according to the Commerce Department.
When a country runs a deficit in the current account, it relies on overseas investment to offset a shortfall in savings. Net purchases of U.S. stocks, notes and bonds by investors from abroad fell to $15.6 billion in December, the lowest level in almost five years, according to the Treasury Department.
Nineteen of the 47 central banks surveyed had cut their share of dollars, with 10 saying that they had increased holdings of the U.S. currency.
Twenty-one respondents said they had increased their reserves of euros, compared with seven who said they had reduced their holdings of the currency.
Nine central banks also increased their holdings of the pound, citing the yield on sterling-denominated assets as the most popular reason.
Central banks bought $36.2 billion of reserves in pounds in the four quarters ended Sept. 30, according to the IMF.
The Bank of England raised interest rates last month to a five-year high of 5.25 percent, and the higher yield has attracted investors. That compares with a benchmark rate of 3.5 percent in Europe and 0.5 percent in Japan. |
