mercredi 1 avril 2015
Middle East And China Need To Sell Euros - Deutsche Bank
Posted on 23:06 by nice news
Data released by the IMF yesterday showed that the share of the EUR in global central bank reserve assets again dropped to a new cycle low of 22% last year, notes Deutsche Bank.
Almost the entire drop is due to valuation effects however, showing little active selling of euros in 2014, but according to DB, this is actually not the full picture. Why?
"The IMF data excludes two of the world's largest holders of FX reserves, holding as many assets as the rest of the world's central banks combined. It is precisely these holders that have the largest ongoing potential to sell euros," DB argues.
(1) The Middle East. "The region currently holds 1 trillion dollars in official FX reserves and another 2.5 trillion via large sovereign wealth holdings. We estimate that Middle East oil producers are running a combined fiscal deficit of more than 200bn in 2015, and low-yielding European assets seem like the primary candidates of assets to be sold," DB projects.
(2) China. "The country may be the world's largest holder of FX reserves, but it is also running these down at the fastest pace in history," DB adds.
"In conclusion, the Middle East and China stand out as two regions that are likely to face ongoing pressures to run down reserves over the next few years, with low-yielding European reserves likely to be the main casualties of the post-EM and commodity boom trends," DB concludes.
Almost the entire drop is due to valuation effects however, showing little active selling of euros in 2014, but according to DB, this is actually not the full picture. Why?
"The IMF data excludes two of the world's largest holders of FX reserves, holding as many assets as the rest of the world's central banks combined. It is precisely these holders that have the largest ongoing potential to sell euros," DB argues.
(1) The Middle East. "The region currently holds 1 trillion dollars in official FX reserves and another 2.5 trillion via large sovereign wealth holdings. We estimate that Middle East oil producers are running a combined fiscal deficit of more than 200bn in 2015, and low-yielding European assets seem like the primary candidates of assets to be sold," DB projects.
(2) China. "The country may be the world's largest holder of FX reserves, but it is also running these down at the fastest pace in history," DB adds.
"In conclusion, the Middle East and China stand out as two regions that are likely to face ongoing pressures to run down reserves over the next few years, with low-yielding European reserves likely to be the main casualties of the post-EM and commodity boom trends," DB concludes.
Middle East And China Need To Sell Euros - Deutsche Bank
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