Countries in the developing world are drastically reducing their euro holdings as economic instability in Europe leads them elsewhere to stock their currency reserves. Euro holdings are at their lowest level in a decade, according to the International Monetary Fund.
That is the message to be gleaned from the latest installment of the regular International Monetary Fund report on currency reserves held by countries around the world. According to the report, developing economies shed some $45 billion worth of euros in 2012 and have sold close to $90 billion worth of euros since the second quarter of 2011.
The numbers seem to indicate that the ongoing euro crisis, fueled by high sovereign debt loads in several countries belonging to the common currency union, has eroded global confidence in the euro. During the same period, US dollar holdings among developing economies have continued to rise.
“It’ll be the number two international currency but I wouldn’t say there are any prospects of it challenging the dollar,” Jeffrey Frankel, a professor of economics at the Kennedy School of Government at Harvard, told the Financial Times when asked about the report.
Full article: Developing World: Euro Loses Attraction as Reserve Currency (Spiegel Online)