IMF Data Validates "Don't Go Against The Dollar"
The dollar closed on Friday at a 2 month high versus the much overrated Euro and recent IMF data validates and justifies a redux of our long term position, Don't Go Against The Dollar.
While most investors suspected there was wholesale diversification from USD holdings by major central banks, the IMF’s data paint a very different picture. The volume of EUR purchases last year was significantly less (about half) than the share of EUR holdings in total reserves at end-2003.
The latest IMF report shows global holdings of official reserves in USDs rose from 65.8% to 65.9%. This result is particularly impressive when we consider how much the USD depreciated during 2004. The IMF reports, in volume terms, the increase in reserves in USDs accounted for 80% of the total increase in reserves.
The share of USD assets in total reserve holdings rose in both nominal and real terms, while there were signs of diversification from EURs, in relative terms.
Morgan Stanley
While most investors suspected there was wholesale diversification from USD holdings by major central banks, the IMF’s data paint a very different picture. The volume of EUR purchases last year was significantly less (about half) than the share of EUR holdings in total reserves at end-2003.
The latest IMF report shows global holdings of official reserves in USDs rose from 65.8% to 65.9%. This result is particularly impressive when we consider how much the USD depreciated during 2004. The IMF reports, in volume terms, the increase in reserves in USDs accounted for 80% of the total increase in reserves.
The share of USD assets in total reserve holdings rose in both nominal and real terms, while there were signs of diversification from EURs, in relative terms.
Morgan Stanley
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