Central Banks Diversify but Don't Dump Dollars |
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January 13, 2010
Diversification of central bank foreign-exchange reserves is more a change in management style than a rejection of the dollar.
Diversification of central bank foreign-exchange reserves is more a change in management style than a rejection of the dollar.
Rather than looking to solely preserve their reserves, some central banks are seeking better performance from their stacks of reserves. Higher-yielding regional currencies stand to gain in the process, with the dollar bloc consisting of Canada, Australia and New Zealand the most favored at the moment.
But this effect could be temporary and by no means implies abandoning the greenback as the world's dominant reserve currency. The change is much more subtle than a shunning of the dollar on fundamental grounds.
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