International Monetary Fund, the Washington DC-headquartered sister organization of the World Bank largely centring its focus on fostering global economic growth and cooperation, had unveiled later last week that the American Currency’s share of global reserves inched up to 59.5 per cent over fiscal first quarter of the year from a 58.9 per cent logged in Q4, 2020, while US Dollar remains the world’s largest-held foreign currency among major Central Banks.
In factuality, Central Banks across the globe usually hold multiple foreign currencies largely aimed at backing up their liabilities. Besides, there were a swathe of incidents that involved Central Banks intervening Global FX market with foreign currency reserves in a bid to support their own currencies, which in effect usually prompt Central Bank Governors to hold a relatively stable foreign currency.
US Dollar’s share of global reserves rises in Q1
According to International Monetary Fund (IMF) data revealed later last week, foreign currency reserves held in American Dollar fell to $6.991 trillion over fiscal first quarter compared to a $6.996 trillion registered at the previous quarter, while FX reserves held in euros, the bloc’s common currency shared among 19 member states, tumbled 4.4 per cent to $2.415 trillion on a quarter-on-quarter basis.
Apart from that, Chinese Yuan’s share as a foreign reserve currency rose 2.4 per cent on Q1, 2021, from a 2.2 per cent clocked a quarter earlier, marking up the fifth consecutive quarter of gains as a global reserve currency.
Meanwhile, adding that the peak allocation of the greenback as a reserve currency has been 72.7 per cent during Q2, 2021 amid a sharp decline in risk-appetite following an outbreak of delta variants across South-east Asia, a chief FX strategist at Scotiabank in Toronto, Shaun Osborne, wrote in a research note following the IMF data, “Given the U.S.
dollar's broader gains through Q1, the rise in U.S. dollar's holdings may be more apparent than real. Broader trends do underscore the gradual shift away from the U.S. dollar in reserve holdings”. The US Dollar Index (DXY) measured against a basket of six major currencies on an average rose 3.6 per cent over fiscal first quarter of the year.