Sovereign credit concerns, low interest rates reshaping world reserves

Tue Apr 23, 2013 5:44am EDT
 
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* Central bank reserve diversification likely to speed up

* Canada, Australia, China, Brazil, Russia, Norway in mix

* Driven by low interest rates, sovereign downgrades

By Natsuko Waki

LONDON, April 23 (Reuters) - After years of being also-rans, currencies from countries such as Canada, Australia, China, Brazil, Russia and Norway now have a realistic chance of breaking deeper into the $11 trillion global reserve mix.

Such a move, if it came, could encourage billions of dollars in private investment to ride along in the slipstream.

Deteriorating sovereign credit quality across industrial economies has already begun to push central bank asset managers to diversify away from the traditionally dominant U.S. dollar, euro, Japanese yen, British pound and Swiss franc.

The latest IMF report - the only official data on how reserves are managed - showed central bank holdings of currencies such as Australian and Canadian dollars jumped 25 percent to 6.1 percent at end-2012.

That's small compared with the 85 percent still held in U.S dollars and euros. But it points to the future.   Continued...