Euro share of FX reserves lowest in more than decade: IMF data

The share of currency reserves in the euro held by central banks fell to its lowest in over a decade in the third quarter of 2014 at less than 23 percent, according to International Monetary Fund data released on December 31. The euro share of IMF reserves totalled $1.4 trillion, or 22.6 percent of the total allocated reserves, down from $1.5 trillion, or 24.1 percent, in the second quarter of 2014. The latest share was the lowest percentage since the third quarter of 2002.
Global foreign exchange reserves overall fell to $11.8 trillion, marking the first quarterly drop since the financial crisis in late 2008/early 2009. Global reserves hit a record $12 trillion in the second quarter of 2014. 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 to influence exchange rates.
"The data indicates that there was no appetite to buy the euro after an 8 percent correction in the third quarter," said Sebastien Galy, senior foreign exchange analyst at Societe Generale in New York. Galy said foreign reserve managers did not buy the euro in the third quarter since the European Central Bank's stimulative policy of negative interest rates made it extremely expensive for them to do so. He also said the data suggested the managers may have sold the euro.
"This changes the entire dynamics of euro/dollar," Galy said. He said the data signalled coming weakness in the euro and that it could hit $1.14 against the greenback in the first quarter of 2015. The euro hit a 4-1/2-year low of $1.2005 on Friday. The US dollar's share of reserves rose to 62.3 percent, totalling $3.9 trillion, up from 60.7 percent in the previous quarter and marking the highest share since the last quarter of 2011. The yen's share was roughly unchanged from the previous quarter at about 4 percent. Central banks held US $117 billion in the Australian dollar globally as of the third quarter, down from US $121.6 billion in the second quarter of 2014. They held US $118.9 billion in Canadian dollars, down from US $125.2 billion previously.