The International Monetary Fund‘s report, released this Friday, shows that the specific part of U.S. dollar in world’s foreign currency reserves fell significantly in 2007.
The U.S. dollar is losing its position as the international reserve currency giving it up to euro and Great Britain pound. In 2007 Q3 the dollar’s share in the Forex reserves was at 63.8%, it was 65.0% in the second quarter this year and it was 66.5% in third quarter of 2006. This shows a definite downtrend in the dollar’s share.
The euro’s share went the opposite direction — it was 26.4% in 2007 Q3 — a significant growth compared to both 25.5% in Q2 and 24.4% in 2006 Q3.
Such a pessimistic trend for the U.S. dollar started during 2006 and now continues after the dollar lost 11.8% to euro in 2006 and was losing 11.2% through 2007
China and several other countries (mainly commodity exporting), whose earnings rallied during the last years, expressed their wish for the reserve funds diversification from U.S. dollar, spending more of the reserve money to go for euro and pound, thus contributing their part to the dollar’s fast depreciation.
Although this trend shows a weakness of the dollar, the recent developments and forecasts for the year 2008 show that there might be some reversal in the dollar’s global course with a possible gain it its share in the world’s Forex reserves.
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