Central banks 'shunning dollar'

[ze_dscherman]

Many of the world's central banks are starting to look to the euro to fill their currency reserves instead of the dollar, a survey suggests.
The poll carried out by Central Banking Publications found 39 nations of the 65 surveyed raising their euro holdings, with 29 cutting back on the US dollar.

The dollar's sharp fall in the face of huge deficits could be one cause of the switch, the report says.

The survey was sponsored by the UK's Royal Bank of Scotland.

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http://news.bbc.co.uk/1/hi/business/4200811.stm


Also
Dollar at mercy of central banks

By Chris Giles, Economics Editor
Published: January 24 2005 02:00 | Last updated: January 24 2005 02:00

During the past few years the US has become dependent, not so much on millions of investors around the globe but on a few individuals in a few of the world's central banks.

In 2003, the most recent year with full international statistics, central banks financed 83 per cent of the US current account deficit, with Asian central banks accounting for 86 per cent of flows.

A similar picture is emerging for 2004. Despite a good start to the year, when the private sector was a large net purchaser of dollar assets, central banks came to the rescue again. The People's Bank of China has let it be known that China increased dollar reserves by $207bn (€159bn) in 2004, financing nearly a third of the US current account deficit, estimated at $650bn.

Self-interest has supported much of this flow of cash. The US has lapped up cheap finance to fund its unquenchable appetite to spend. Asian governments have until now been keen to oblige, in order to keep their currencies from appreciating. But all investors have their limits and they may start worrying about their degree of exposure.

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http://news.ft.com/cms/s/bd52ee06-6dad-11d9-ae0d-00000e2511c8.html