Magazine article Global Finance

The Americas: Dollar's Role Secure as Reserve Asset

Magazine article Global Finance

The Americas: Dollar's Role Secure as Reserve Asset

Article excerpt

CORPORATE FINANCING NEWS

FOREIGN EXCHANGE

Plans by Russia and Central and Eastern European central banks to boost their non-dollar reserves do not threaten the future of the dollar as a reserve asset, analysts say.

"The dollar is on one side of 90% of all trades in the spot and forward foreign exchange markets," says Marc Chandler, chief currency strategist at HSBC Bank USA in New York.

"Central banks continue to rely heavily on the dollar as a reserve asset, and its role as such has increased-despite the large current-account deficit and the growing indebtedness of the United States," Chandler says.

According to the International Monetary Fund, the US dollar accounted for 50% of reserves of industrial countries in 1990. By 2001 the dollar's share had increased to 75%.

The Federal Reserve acts as a custodian for many foreign central banks, Chandler notes. The Fed's custody account rose by $150 billion in 2002. …

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