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Sri Lanka Equity Forum » Stock Market Talk » US dollar’s share of global foreign reserves hits lowest since 2013

US dollar’s share of global foreign reserves hits lowest since 2013

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Miss-Sangeetha

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Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
The US dollar's share of global central bank reserves fell to the lowest level since 2013 while holdings of the Chinese yuan rose for a fourth consecutive quarter, International Monetary Fund (IMF) data showed Friday.
The US currency accounted for 62.3 per cent of global allocated foreign-exchange reserves in the second quarter, down from 62.5 per cent and the ninth decline in the past 10 quarters, the IMF said in a report. The drop occurred despite a 5 per cent jump in the value of the US dollar in the second quarter. The euro, yen and yuan each gained as a share of allocated reserves.
Political rifts between the US and other countries could be to blame, but the numbers don't offer firm conclusions, said Steven Englander, Standard Chartered Plc's head of global G-10 FX research and North America macro strategy. Recent emerging-market turmoil could require interventions by some central banks, and the US dollar is the easiest currency for that purpose, he said.
"Countries having political issues with the US may have wanted to re-allocate dollars," Mr Englander said. Even still, it's difficult to determine whether the shift was due to "normal smoothing operations", he said.
The shift to allocated reserves could also be skewing the data, according to Alan Ruskin, global co-head of foreign-exchange research at Deutsche Bank. The share of unallocated reserves - those not disclosed in the IMF data - fell in the second quarter to 8.4 per cent from 10.4 per cent.
"I wouldn't go too far in running with the idea that people are shifting out dollars in any aggressive sense," he said.
The ramifications of the shift are still significant. For more than a half century, the US dollar has been the reserve currency of choice for most of the world's central banks, for its depth and stability in global markets. That status has given the US some notable advantages, helping America keep a lid on funding costs and run budget deficits, as trading partners park their dollars in US government bonds.
The benefits also extend to American companies because the widespread use of US dollars in global trade, such as for oil and commodities, often makes it cheaper for US multinationals to borrow compared with many of their overseas competitors.
Other findings in the IMF's latest figures show China's yuan - officially called the renminbi - is increasingly incorporated in global reserves, growing to 1.84 per cent as a share of allocated holdings from 1.4 per cent in the prior quarter. That came as the value of the currency fell 5.2 per cent against the US dollar in the April-June period.
"China's efforts to internationalise the renminbi are getting to bear some fruit," Mr Englander said.-
- The Business Times & Adaderana

janith123


Equity Analytic
Equity Analytic
China cant win over usa due to lack of brands.
Usa has lot of internationalized brands. Like coke,apple,google,facebook,J&J,KFC....
Think about china merely they dont have even one brand their strength depend on USA and European customers...
So $ will be main currency for a foreseeable future.

Kokoshka

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Stock Trader
@janith123 wrote:China  cant win over usa due to lack of brands.
Usa has lot of internationalized brands. Like coke,apple,google,facebook,J&J,KFC....
Think about china merely they dont have even one brand their strength depend on USA and European customers...
So $ will be main currency for a foreseeable future.
that's true but chinese brads are quickly developing. Huawei, oppo as example of mobile brands. Their main advantage is their population.

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samaritan


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Trump being a successful businessman is adopting business strategies in governing the USA and strengthening its economy which may force other nations who were dependent on US aid to polarize with China another economic giant. Not that the former Presidents did not know to do what Trump is doing but they were mindful of social responsibility as well. In the long term the consequences may not be in favour of the USA. Trump is behaving like 'Danduwam Mudalali'!

Miss-Sangeetha

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Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@janith123 wrote:China  cant win over usa due to lack of brands.
Usa has lot of internationalized brands. Like coke,apple,google,facebook,J&J,KFC....
Think about china merely they dont have even one brand their strength depend on USA and European customers...
So $ will be main currency for a foreseeable future.
America’s dominance is now fading. China’s phone companies such as Huawei now challenging apple and South Korea’s Samsung another one ZTE is now leading manufacturer of information technology products. VIVO and Hisense phone companies also own by china
China’s huge population with growing per capita income soon will replace the USA and already replaced the japan from its second world economy position.
China’s goods and services now infiltrated everywhere all over the world and comparatively cheap than US products this is the reason US companies are producing their goods in china because of the china’s economies of scales.
This is also the reason American government now imposing Tariffs and sanctions on china’s products         

janith123


Equity Analytic
Equity Analytic
But now some US companies are planning to shift .i also dont like american dominance but due to brand value in EU and other rich asains and middle eastern countries go for brands not generic name.
Huawei and ZTE still only have 11.5 % market due to huge chinese population.developing a brand is not easy ,coca cola is market leader in many countries except srilanka and other few.Yesrerday new NAFTA discussions started .that alloe to capture quality raw materials to USA from canada .
China has only economies of scale but they have very fewer quality items.

ranferdi

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Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Miss-Sangeetha wrote:
@janith123 wrote:China  cant win over usa due to lack of brands.
Usa has lot of internationalized brands. Like coke,apple,google,facebook,J&J,KFC....
Think about china merely they dont have even one brand their strength depend on USA and European customers...
So $ will be main currency for a foreseeable future.
America’s dominance is now fading. China’s phone companies such as Huawei now challenging apple and South Korea’s Samsung another one ZTE is now leading manufacturer of information technology products. VIVO and Hisense phone companies also own by china
China’s huge population with growing per capita income soon will replace the USA and already replaced the japan from its second world economy position.
China’s goods and services now infiltrated everywhere all over the world and comparatively cheap than US products this is the reason US companies are producing their goods in china because of the china’s economies of scales.
This is also the reason American government now imposing Tariffs and sanctions on china’s products         

True Americas dominance is challenged and fading, But will the US allow it that way is the question, USA will shake the tree many times so the fear will bring China and other inline. It will be horrible period if transition ever to happen from USA to China.

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