Asian banks cut US dollar balance
Asian banks cut US dollar balance
HONG KONG (Reuter): Asia's central banks are reducing the
weighting of U.S. dollars in their coffers in favor of other
major currencies as the dollar loses its eminence, economists
said yesterday.
Hong Kong and Australia have owned up to cutting the
proportion of U.S. dollars.
Taiwan, Singapore and Indonesia are believed to have altered
the mix and other central banks are also thought to be acting
quietly to reduce the dollar balance.
"This has been happening for some time -- more Deutschemarks
and yen and less U.S. dollars," said Enzio von Pfeil, economist
with S.G. Warburg in Hong Kong.
Von Pfeil said it was natural for central banks to want to
preserve the value of their reserves, adjusting their portfolios
according to currency fluctuations.
But the move could reflect a change in investment strategy as
central banks switch their emphasis gradually to other units such
as the mark and yen, and even smaller but more stable currencies
such as the New Zealand and Singapore dollars.
"It's a trend change (fall in U.S. dollars) but not a drastic
change," said von Pfeil.
The U.S. dollar has dropped more than 15 percent to around 84
yen currently from 99.70 yen at the start of 1995, and 112 yen at
the start of 1994.
The Hong Kong Monetary Authority (HKMA) said yesterday it had
slightly reduced the U.S. dollar component in its Exchange Fund,
its war chest to defend the Hong Kong dollar.
"Since the beginning of the year we have been watching the
falling U.S. dollar and we have slightly increased the yen and
Deutschemark assets at the expense of U.S. dollar assets," said
Julia Leung, spokeswoman for the HKMA, the de facto central bank.
The Exchange Fund's U.S. dollar holdings stood at 73 percent
of total assets of HK$408 billion (US$52.3 billion) at the end of
1994. This was down from 74 percent of the total assets at the
end of 1993.
In Australia, the Reserve Bank's holdings of U.S. dollars
dropped to A$4.376 billion (US$3.24 billion) in February 1995
from A$6.234 billion (US$4.61 billion) in June 1994. During the
same period, holdings of yen jumped to A$4.397 billion (US$3.25
billion) from A$2.753 billion (US$2.04 billion).
Economists said central banks were by nature conservative and
were unlikely to move suddenly if a currency lurched up or down.
Changes in policy would require a longer term view.
Indonesia
In Indonesia, sources close to the central bank said Indonesia
has quietly increased its weighting of Japanese assets in its
foreign exchange reserves.
The government has said Indonesia's foreign debt totaled some
US$87.6 billion by the end of December of which about 40 percent
is denominated in yen currency.
"I think it is a phenomenon that a lot of Asian central banks
have already changed their composition of their foreign exchange
reserves," said Edwin Png, treasury head of Bank of America in
Jakarta.
Taiwan's central bank officials declined to comment on
currency holdings. But the local press speculates that Taiwan's
U.S. dollar holdings declined and marks were on the rise.
Taiwan's foreign exchange reserves hit a record high of US$93.2
billion at the end of January.
In Singapore, cash is the only asset the government has so it
keeps details on reserves close to its chest.
Singapore had S$85.17 billion (US$60.7 billion) in official
foreign reserves in December 1994. It is generally thought that
about one-third of Singapore's reserves are in U.S. dollars.
"The fact of the matter is that the U.S. is the world's
biggest capital market, said von Pfeil. "But it does not mean
there isn't room for other currencies to play a role."