reserve currency

Claire Jones

IMF data to include Australian dollars. Getty

It is often forgotten that central banks are major players in global capital markets. At the last count, monetary authorities held reserves worth $10.5tn, according to International Monetary Fund data.

Most of this stockpile is thought to be invested in “safe” assets, such as government bonds of highly-rated sovereigns and gold. But, while some of the more open monetary authorities, such as the Swiss National Bank, provide some information about the currency composition of their reserves and asset allocation, most of the big reserves holders, located in Asia, don’t.

Not a lot is known about what’s held in central banks’ coffers. This matters because changes in central bank reserve managers’ behaviour can endanger financial stabilityRead more

China will allow foreign central banks and overseas lenders to start investing in the country’s domestic interbank bond market for the first time, in a move aimed at encouraging internationalisation of the Chinese currency.

The People’s Bank of China, the central bank, said on Tuesday it had launched a pilot project to allow greater foreign access to its largely closed domestic interbank bond market in order to “encourage cross-border Rmb [renminbi] trade settlement” and “broaden investment channels for Rmb to flow back [to China]”. Read more

China has repeated its commitment to US debt (as though they’d do anything else when they’re long an estimated $2,450bn). But the data back them up. Figures show the drop in US holdings was among advanced economies; emerging economies increased their holdings, in aggregate, between Q409 and Q110. Indeed, emerging markets’ increase more than offset advanced countries’ decrease, leading to a small net increase overall. Data from IMF.

Related post: Advanced economies destock dollar by $5.5bn (July 2)

Iran’s central bank governor says the country gained about $5 billion by shifting its foreign currency reserve basket from the US dollar to the euro, reports AFP. Mahmoud Bahmani was quoted by Iran’s state television as saying that ‘so far, we have seen a $5 billion benefit from shifting the (currency) basket to the euros from the dollar.’ He did not elaborate. Earlier this year, Iran said it was switching to the euro for its crude oil sales, which account for about 80 percent of its foreign income.

Quantitative easing set to expand as fresh capital is required, particularly in emerging markets. London’s competitiveness as a financial centre is threatened and rumours of devaluation in Switzerland and Venezuela Read more

As Russia invites foreign investment, China encourages domestic investment in commercial property. US housing prices are marginally improved but on thin volume, and unemployment data looks grim Read more