US dollar share in FX reserves falls in Q1: IMF

Data from the International Monetary Fund showed on Thursday that the US currency's share of the roughly $5.3 trillion of world reserves, of which the composition is known, slipped to 60.7 percent from 61.5 percent in the prior quarter and 61.6 percent a year earlier.

The drop in the dollar's share of central bank reserves reflected a continuing trend among these institutions to diversify away from the greenback. It also reflected the dollar's weakness in the first quarter, falling 4 percent as measured by the ICE dollar index.

Overall reserve accumulation by global central banks hit a record at nearly $9.7 trillion, rising for an eighth straight quarter. Part of the jump in global reserves was the increase in developing countries' holdings to $6.5 trillion, rising 6 percent in the first quarter from the previous three months.

"Even though the dollar component of reserves actually increased, the fact that (it fell) as a percentage of allocated reserve will give the 'dollar is history' camp fodder," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.

But he added that a quick snapshot of currency allocations may not provide the true picture given that the unknown or unallocated reserves grew. Data showed that unallocated reserves, which looked to be largely accounted for by China, rose to $4.4 trillion.

Unallocated reserves now accounted for more than 45 percent of total global holdings, up from about 44.7 percent in the fourth quarter of 2010.

While advanced industrialized countries added just $1.6 billion to their dollar holdings in the first quarter, developing countries accumulated roughly $65 billion, which may reflect intervention and the conversion of trade surpluses in some countries.

The euro's share was steady at around 26.5 percent in the first quarter from 26.3 pct in the previous quarter.

One interesting trend, however, was the continued increase in the share of "other currencies", which analysts said referred to commodity-linked Australian and Canadian dollars. Their share rose to 4.7 percent of allocated FX reserves from about 4.4 percent in the fourth quarter of 2010.

Data also indicated that developed countries reduced their holdings of "other" currency reserves by about $1 billion, while the developing countries boosted their "other" holdings by almost $25 billion.

The yen's share, meanwhile, was little changed at 3.8 percent of total reserves versus 3.7 percent in the fourth quarter of last year. That first-quarter figures included the coordinated intervention by central banks to stabilize the yen after Japan's earthquake in March.

Sterling's share in global reserves increased to 4.1 percent from 3.9 percent in the fourth quarter of 2010.

Copyright Reuters, 2011