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."