US dollar share of global reserves dips in second quarter: IMF

The US dollar''s share of known global reserves held by central banks slipped in the year''s second quarter, International Monetary Fund data showed on Friday. The greenback''s share of the roughly $5.8 trillion of known reserves was 61.9 percent in the second quarter compared with 62.1 percent during the first three months of the year.
Despite the dollar''s declining share, the report was positive for the dollar, which remains the "reserve currency of choice," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.
Total global central bank holdings, including currencies not specified, rose to a record of more than $10.5 trillion. Despite the euro zone debt crisis, the euro''s share of global reserves increased to 25.0 percent from 24.9 percent in the first quarter. The central banks'' allocation to euros increased by $45.5 billion in the second quarter, the data showed. In 1999 the euro had an 18 percent share of reserves, which peaked at 28 percent in 2009 and has stabilized around 25 percent.
One notable trend was the reduction of euro exposure by emerging market central banks by about 4 percent to $695 billion from $723 billion in the first quarter. Emerging market central banks also held the bulk of reserves at $6.8 trillion, up about 0.5 percent from the previous quarter. But the pace at which these central banks accumulated reserves slowed.
The dollar index firmed 3.2 percent in the second quarter, suggesting that as the greenback rose, the emerging market central banks had less need to accumulate dollars to keep their currencies weak for global trade purposes, Sutton said. Another noteworthy trend was in the category of "other currencies," which mainly means commodity-linked currencies, such as the Australian and Canadian dollars.
Their share of overall currency reserves grew to 5.3 percent of the total in the second quarter from around 5.2 percent in the first three months of the year. On a year-over-year basis, central banks'' holdings of "other currencies" jumped 15 percent. Unallocated reserves, or those not known and believed mostly held by China, slipped to $4.6 trillion in the second quarter from $4.7 trillion the previous quarter. Global reserves are assets of central banks held in different currencies primarily used to back their liabilities. Central banks have sometimes co-operated in buying and selling official international reserves in order to influence exchange rates.