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Dollar, Euro Share of Global Reserves Declined in First Quarter, IMF Says

By Sandrine Rastello - 2010-06-30T18:32:11Z

The euro and dollar’s share of global foreign-exchange reserves both fell in the first quarter as central banks increased holdings of currencies from other economies, the International Monetary Fund said.

The U.S. currency’s portion dropped to 61.5 percent in the period ended March 31, matching the lowest in more than a decade, from a revised 62.2 percent in the prior quarter. The euro’s share slipped to 27.2 percent from a revised 27.3 percent, while the yen gained and the pound was unchanged.

Central banks reported larger holdings of currencies in the IMF’s category that may include Canadian dollars, Australian dollars and the Norwegian krone. Leaders including Russian President Dmitry Medvedev have called for a supranational currency to challenge the dollar’s dominance and wider international use of the ruble.

“The numbers do feed into the storyline that central banks have been diversifying,” said Win Thin, a New York-based senior currency strategist at Brown Brothers Harriman & Co.

The IMF reports reserve holdings of U.S. dollars, euros, pounds, yen and Swiss francs. The share of “other currencies” rose to 3.7 percent, from 3.1 percent in the previous quarter and the highest level in at least a decade of IMF record- keeping.

The euro fell 5.7 percent against the dollar from January through March, its steepest quarterly drop against the U.S. currency since a 10.6 percent decline in the third quarter of 2008. The slide has continued through the second quarter, with the euro about 9 percent weaker since March 31.

‘Safe-Haven’

“The timing is kind of interesting because at the time we were all looking at significant safe-haven flows into the U.S. dollar from many countries around the world,” Kathy Lien, director of currency research with online currency trader GFT Forex in New York. “It means maybe that participation wasn’t necessarily from central banks, perhaps central banks were simply selling the euros and not necessarily accumulating dollars at the same time.”

The pound’s share of reserves was unchanged at 4.3 percent, while the yen’s portion rose to 3.1 percent from 3 percent, according to the IMF data.

The IMF calculated the dollar’s share based on data from central banks that report their currency allocations. Some countries, including China, the world’s largest reserve holder, don’t give currency breakdowns.

To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net;