London: The euro’s challenge to the international status of the US dollar has been set back a generation as new data show developing countries dumping the European currency from their official reserves.
Central banks in developing countries sold ¤45bn in 2012, according to data compiled by the International Monetary Fund, cutting their holdings of the currency by 8 percent, reported the Financial Times yesterday.
This highlights the damage Europe’s sovereign debt crisis has done to its standing in the international financial system as the chance of rivalling the dollar — one dream of the single currency’s founders — slips away, the newspaper said.
“It’ll be the number two international currency, but I wouldn’t say there are any prospects of it challenging the dollar,” said Jeffrey Frankel, professor of economics at Harvard’s Kennedy School of Government.
The choice of where to hold reserves sends a clear signal of which currencies developing countries regard as the most stable, safe and liquid.
Euros now make up only 24 percent of their reserves, the lowest since 2002, and down from a peak of 31 percent as recently as 2009. The dollar has held steady at about 60 percent.
QNA
