Central Banks selling US Dollars - article repository

Discussion in 'Wall St. News' started by m22au, Apr 21, 2006.

  1. m22au


    LONDON, April 21 (Reuters) - The euro jumped half a U.S. cent and gained against the yen on Friday after Sweden's central bank said it had boosted the euro's share of its foreign exchange reserves.

    The Riksbank said it had reallocated foreign currency reserves over the past four weeks, cutting the dollar's share to 20 percent from 37 percent. The euro's share has risen to 50 percent from 37 percent, it said.

    Sweden has foreign currency reserves above $20 billion.

    The euro gained half a cent against the dollar to hit the day's highs at $1.2349 <EUR=>, putting it within sight of this week's seven-month high of $1.2394. By 0900 GMT, the euro had eased to $1.2325 as traders realised the change has already taken place.

    The euro's rise also helped other currencies against the dollar.

    "With the coments that we've seen generally in recent weeks over increasing euro share in central bank reserves, it's not surprising ... I guess Sweden is going along with the trend in other banks," said Mitul Kotecha, head of global foreign exchange research at Calyon.

    "Euro is gaining a stronger foothold in terms of its use as a reserve currency. Clearly it's nowhere near the U.S. dollar, but I think it's important that it's gaining."

    Central banks' diversifying away from the dollar was one of the main factors behind the dollar's slide to record lows against the euro in 2004.

    The central bank also cut sterling's share of its reserves to 10 percent from 11 percent and raised the Norwegian crown's share to 10 percent from zero percent. The Norwegian crown rose around 20 ticks against the dollar <NOK=>.

    The Riksbank also elimated the yen from its reserves. The currency, which slipped against the euro <EURJPY=>, had previously made up 8 percent.

    "The news should naturally refocus attention on euro/dollar and euro/yen upside. The impact on the Norwegian crown should be less pronounced -- the flow into NOK is very much a one-off that other central banks are unlikely to replicate," JP Morgan said in a note to clients.