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Nations abandoning dollar
Key Excerpts from Article on Website of Bloomberg News
Posted: October 17th, 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=aOTmsmEQ...
Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades. Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June. Thats the highest percentage in any quarter with more than an $80 billion increase. World leaders are acting on threats to dump the dollar while the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the economy as long as it doesnt drive away the nations creditors. The diversification signals that the currency wont rebound anytime soon after losing 10.3 percent on a trade-weighted basis the past six months, the biggest drop since 1991. Global central banks are getting more serious about diversification, whereas in the past they used to just talk about it, said Steven Englander, a former Federal Reserve researcher who is now the chief U.S. currency strategist at Barclays in New York. It looks like they are really backing away from the dollar. The dollars 37 percent share of new reserves fell from about a 63 percent average since 1999. Americas currency has been under siege as the Treasury sells a record amount of debt to finance a budget deficit that totaled $1.4 trillion in fiscal 2009 ended Sept. 30.
Note: For insightful analyses of the US financial crisis, click here.
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