US Dollar Refuses to Die as Global Reserve Currency — But Loses Ground
Chinese RMB gains, but is inconsequential as central banks remain leery. Euro hangs on.
Those who’re eagerly awaiting the end of the “dollar hegemony,” or the end of the dollar as the top global reserve currency, well, they’ll need some patience, because it’s happening at a glacial pace – according to the IMF’s just released data on the “Currency Composition of Official Foreign Exchange Reserves” (COFER) for the second quarter 2018.
What it confirms: Global central banks are ever so slowly losing their appetite for being over-exposed to US-dollar-denominated assets, though they’re not dumping them from their foreign exchange reserves; they’re just tweaking them.
They’re not dumping euro-denominated assets either; au contraire. But they’re giving up on the Swiss franc. And they remain leery of the Chinese renminbi though they’re starting to dabble in it – it seems at the expense of the dollar.
In Q2 2018, total global foreign exchange reserves, in all currencies, rose 3.2% year-over-year, to $11.48 trillion, well within the range of the past three years. For reporting purposes, the IMF converts all currency balances into US dollars.
US-dollar-denominated assets among these reserves edged up to $6.55 trillion, but given the overall rise of total foreign exchange reserves, the share of dollar-denominated assets among these reserves edged down to 62.25%, the lowest since the period 2012-2013. In this chart of the dollar’s share of reserve currencies, note its low point in 1991 with a share of 46%. And note the arrival of the euro:
The euro became an accounting currency in the financial markets in 1999, thereby replacing the former European Currency Unit (ECU). Euro banknotes and coins appeared on January 1, 2002. At the end of 2001, the dollar’s share of reserve currencies was 71.5%. In 2002, it dropped to 66.5%. By Q2 2018, it was down to 62.25%.
…click on the above link to read the rest of the article…
