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WORLD CURRENCIES


than percentage change. It is the wrong metric. Because all the assets are converted into dollars, there will be some variances that are just noise, like


your


turning steering


wheel a little before wheels


the turn.


Although the data is reported to hundredths of a percent, we accept that such precision is more illusion than real and based on estimates and c o n s t a n t l y f l u c t u a t i n g instruments.


There does not seem to be a material d i f f e re nc e between 60% or 65%. What matters is the broad developments over the years, a trend. Over the last 20 years, the dollar's share of global reserves has been fairly stable.


The euro's share of


global reserves in Q3 18 stood at roughly 20.5%. In 1995, the German mark (15.75%), ECU (8.53%), French franc (2.35%), and Dutch guilder (0.32%)


combined for just shy of 27% of global reserves. The euro, at 20-years old, is still not bigger than the sum of its parts in


FX


currency composition to the IMF. China has


slowly bled


them in, and this is ref lected in the huge shift from unallocated to allocated r es e r v es . A l l o c ate d r e s e r v e s were valued at $10.705 trillion at the end of Q3 18, this is up from $9.643 trillion at the end of Q3 17. While a l l o c ate d reserves rose by $1.062 t r i l l ion , o v e r a l l reserves rose by only $106 bln.


Over the last 20 years, the dollar's share of global reserves has been fairly stable


terms of a reserve currency.


The dollar's share of global reserves is not only the wrong metric, but it is also the wrong narrative. A shift in the dollar's reserve status is simply not the main development in this space. The most important development has been China's agreement to report its


C o n si d e r t h a t c o u n t r i e s with reserves


valued at $3.505 trillion at the end of 2015 did not want to share the currency al location of their reserves on a confidential basis to the IMF. It was less than $700 bln at the end of Q3 18. Given the magnitudes involved and the size of China's of ficial reserve holdings, the process of slowly incorporating China's


FX TRADER MAGAZINE January - March 2019 63


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