LONDON, April 10 (Reuters) - The trend of central banks reducing holdings of dollars in their reserves has taken a breather but the euro has lost ground while the yuan has also suffered, according to an analysis by ING.
WHY IT'S IMPORTANT
Markets and policy makers follow closely the standing of the U.S. dollar, whose hegemony as the currency of choice for international reserves, trade and transactions has been questioned in recent years amid geopolitical shifts.
The debate has gained momentum in the wake of Russia's invasion of Ukraine, which triggered a raft of sanctions, many of which were aimed at severing Russia from global financial markets that is dominated by the U.S. currency.
BY THE NUMBERS
Recently released IMF data on the currency composition of official foreign exchange reserves (COFER) showed no major shifts in currency structure of allocated reserves, ING said.
Treating the entire historical data set as if global exchange rates were fixed at end-2023 levels shows the dollar share in allocated reserves gained 0.2 percentage points to 58.4% last year - a modest but first annual increase since 2015, ING said. Dollar holdings gained $227 billion in physical terms.
The euro is the biggest loser, its share dropping to 20.0%, or by 0.9 percentage point compared to 2022. Sterling suffered a similar fate. China's yuan, which only emerged as a reserve currency recently, lost share in 2022-23 after gaining the previous six years, though that was partially explained by Russia being forced to spend some of its yuan holdings to finance the budget deficit. Prior to 2022, Russia accounted for around one-third of global international renminbi reserves.
The biggest winner was Japan's yen, adding 0.6 percentage points to 5.7%.
KEY QUOTES
"While it is too soon to make strong calls about the end of the de-dollarisation trend, it would be safe to assume that it took a pause in 2023," said Dmitry Dolgin, ING Chief Economist, CIS. (Reporting by Karin Strohecker Editing by Mark Potter)
