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EUR/USD: Stay Short For 1.15 as Central Banks ‘Offload’

The latest Q3 IMF COFER data adjusted for the changes in currency valuations, shows a large reserve allocation out of Euros on the quarter, notes Deutsche Bank.

“The data fits with the story that the difficulties in preserving capital after negative EUR deposit rates were imposed had a substantial impact on Central Bank’s reserve holdings of EUR,” DB adds.

Here is their view, courtesy of eFXnews:

“After adjustments for Q/Q changes in exchange rates, only the EUR saw declines in its allocation by EUR 56bn. The decline in EUR reserves then uniquely went beyond exchange rate valuations and reflected outright EUR sales,” DB argues.

Foreign exchange reserves by currency as percent of total allocated USD against EUR

“The EUR reserves when adjusted for the exchange rate were still up modestly on the year. Nonetheless, since the EUR crisis, the EUR’s share of total reserves has declined substantially on a medium-term trend basis, hitting a new low of 22.6% of total allocated reserves at the end of Q3. This is the lowest level since 2002, and down from a peak of 28% exactly 5 years earlier,” DB explains.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.