It is not a surprise the dollar continues to be the preferred official foreign exchange reserve currency but the share shows a gradual decline in the past ten years. The IMF’s Currency Composition of Official Foreign Exchange Reserves for the first and second quarter of 2011 places the greenback’s share at 60.6% of official foreign exchange reserves, down from a high of 71.5% in 2001.

The euro’s role has grown from a share of 17.9% in 1999 (when the euro was introduced) to 26.5% in the first two quarters of 2011 (see Chart 3). It is largely a tussle between the dollar and the euro, for now. It is noteworthy that the share of “other currencies” has risen threefold to 4.8% in the first-half of 20o11 vs. 1.6% in 1999. The IMF notes that details of this category are unknown.

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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