U.S. dollar share of global currency reserves slips in third quarter

WASHINGTON (Reuters) - The U.S. dollar’s share of currency reserves reported to the International Monetary Fund slipped in the third quarter of 2016 to its lowest level in two years, data from the IMF showed on Friday.

U.S. dollar notes are seen in this November 7, 2016 picture illustration. Picture taken November 7. REUTERS/Dado Ruvic/Illustration

The July-September period was the third consecutive decline in the dollar’s share of allocated currency reserves, or those reported to the IMF. The decline could reflect increased optimism about the global economy, with the European economy seen on improved footing.

In the third quarter, the dollar comprised 63.3 percent of allocated reserves, the smallest share since the third quarter of 2014. The dollar made up 63.8 percent of allocated reserves in the second quarter.

The euro’s share rose to 20.3 percent in the same period from 20.0 percent the quarter before, while the yen’s share increases to 4.5 percent from 4.4 percent.

The dollar’s value has surged since Donald Trump’s victory in the Nov. 8 U.S. election, which led investors to expect U.S. inflation will accelerate.

IMF data also showed that total foreign exchange reserves worldwide rose to $11.01 trillion from $10.97 trillion in the second quarter. The total amount of allocated currency holdings also rose, to $7.80 trillion, from $7.50 trillion previously.

Unallocated reserves, or those that have not been reported to the IMF, slid to $3.21 trillion from $3.47 trillion in the second quarter. It is widely believed in the currency market that part of China’s reserves are in the unallocated pool.

China began reporting in the second quarter of 2015 a representative portfolio on a partial basis and will gradually increase to full coverage of its foreign exchange reserve assets within two to three years, according to the IMF.

Friday’s data will be the last quarterly report not to separately identify China’s share of global reserve allocations. China’s holdings will be broken out for the first time with the fourth quarter IMF report due in March 2017.

The Australian and Canadian dollars, which have recently been included in the reserves composition, had shares of about 2 percent each.

For the full breakdown of the data, clickhere

Reporting by Jason Lange; Editing by W Simon and Meredith Mazzilli