Reserve currency: Greenback’s share declines, but still largest player

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It is not a surprise the dollar continues to be the preferred official foreign exchange reserve currency, but the share shows a gradual decline in the past ten years. According to Asha Bangalore, vice president and economist of The Northern Trust  Company, the IMF’s Currency Composition of Official Foreign Exchange Reserves for the first and second quarter of 2011 places the greenback’s share at 60.6% of official foreign exchange reserves, down from a high of 71.5% in 2001.

“The euro’s role has grown from a share of 17.9% in 1999 (when the euro was introduced) to 26.5% in the first two quarters of 2011 (see Chart). It is largely a tussle between the dollar and the euro, for now. It is noteworthy that the share of ‘other currencies’ has risen threefold to 4.8% in the first-half of 20o11 vs. 1.6% in 1999. The IMF notes that details of this category are unknown,” said Bangalore.

Source: Asha Bangalore, Northern Trust – Daily Economic Commentary, September 30, 2011.

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