The share of US dollar reserves held by central banks fell to 59 per cent—its lowest level in 25 years—during the fourth quarter of 2020, a survey by IMF shows. ''If the shifts in central bank reserves are large enough, they can affect currency and bond markets,'' says IMF. Meanwhile, the share of the Euro has fluctuated around 20 per cent, while the share of other currencies including the Australian dollar, Canadian dollar, and Chinese renminbi climbed to nine per cent during the period under review. Changes in the relative values of different government securities can also have an impact, although this effect would tend to be smaller since major currency bond yields usually move together. Experts expect that the US dollar’s share of global reserves will continue to fall as an emerging market and developing economy central banks seek further diversification of the currency composition of their reserves.

Source: The Star May 07, 2021 00:56 UTC