Most central banks say they''re shifting dollars into euros

Section:

From BBC News
Monday, January 24, 2005

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

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 U.S. 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.

The last three months of 2004 saw the dollar slip by
7 percent against the euro, taking it to repeated all-time
lows of more than $1.30.

The United States is running a budget deficit of close to
$500 billion a year, funded largely by China and Japan
buying large amounts of U.S. government bonds.

Some economists have suggested that the two could
ease their purchases, making it more difficult for the
United States to support its borrowing.

Similarly, the current account -- the difference between
the amount of money going out of the United States
and coming in -- is deeply in the red, the result largely
of large trade deficits.

Both factors have helped to push the dollar lower.
However, the falling dollar does mean that central bank
holdings of dollar reserves are losing value.

"Generally, central banks' approach to reserve
management is becoming much more active as they
search for higher returns," said the authors of the report.
"The euro seems to have come of age."

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