International Monetary Fund (IMF), the Washington-headquartered sister organization of World Bank primarily engaged in fostering a sustainable global economic growth, said in a report late on Thursday that the American currency’s global share as a reserve currency fell to 60.4 per cent over the third quarter of the year, down from a reading of 61.2 per cent recorded in the second quarter.
Nonetheless, despite a multi-year low benchmark borrowing cost in the US Central Bank which has been thriving a swathe of Wall St. funds lately this year with all three key indices of Wall Street hovering close to their all-time highs, FX markets had still been heavily priced in the US Dollar’s safe-haven bid, and the American currency by far remains the largest-held foreign currency by a gauge of global central banks.
However, US Dollar’s share as a global foreign reserve had witnessed a decline for two straight quarters, while on an annualized basis, US Dollar’s stake as a reserve currency fell to 60.4 per cent from a 61.5 per cent clocked at the same time a year earlier, nonetheless, the downfalls were not significant, suggested several analysts.
US Dollar’s share of global reserve currency falls for two straight quarters
In factuality, still the American currency has been accounting for a lion’s share of the Central Banks’ assets across the globe, while the Central Banks’ usage of US Dollar reserve to help support their respective currencies had surged meteorically during the pandemic-era new normal.
Apart from that, the IMF report had also revealed that the global reserves had been heightened up to a record $12.254 over the third quarter of the year as a number of economies had faced off international travel restrictions amid a fast-spreading pandemic, eventually leading to a rise in the reserves amid a steep lag in import associated expenses.
Besides, IMF data released later this week had unveiled that the global reserves held in US Dollar stood at $6.939 trillion or a 60.4 per cent of entire global FX reserves in the third quarter of the year, while euro’s share as a global reserve currency picked up in Q3 to 20.5 per cent from 20.1 per cent recorded over the second quarter.
Meanwhile, citing that a mass-scale depreciation of US Dollar’s safe-haven demands in a near-term outlook seemed highly unlikely even with the pandemic-led chaos, a Chief Economist and strategist at Rosenberg Research, David Rosenberg wrote in a client note, “It is true that the dollar will one day lose its status, as was the case with every global reserve currency before it, but the chances of this happening in our lifetime are exceedingly low.
The depth of dollar dominance is overwhelming and shows no immediate signs of drying up, even in the aftermath of COVID-19” The US Dollar Index (DXY) measured against a basket of six major currencies dropped as much as 6.4 per cent this year.