Tokyo
Central banks may be a substantial part of the reason why the dollar has come crashing down so rapidly this year, and for the surprising rallies in the yen and the Aussie.
Those are among the potential takeaways after the International Monetary Fund released data at the end of last week on the composition of global foreign-exchange reserves. The figures also show that the total central bank pile rose 1.8 per cent to $10.9 trillion. Reserve managers with a record 81 per cent of those holdings told the IMF which currencies they are invested in, up from just 53 per cent at the end of 2013.
Higher interest rates at the Federal Reserve haven’t done much to boost the dollar’s dominant role in central bank reserves. After climbing to an 8 1/2-year high of 66 per cent at the start of 2015, the greenback has subsided to 64.5 per cent even amid the first rate hikes for more than a decade.
UK voters certainly did the pound no favours when they decided to quit the European Union a year ago. Sterling slid by a record and one-day volatility spiked to an unprecedented 100 per cent — not the sort of behaviour central banks look for, so they’ve kept on paring the pound’s share in their holdings. The yen has been among the beneficiaries.
