Central banks accumulate dollars, gold; get rid of yuan

Investing.com -- More global central banks plan to increase their reserves of the now-high-yielding U.S. dollar as their interest in the Chinese yuan deteriorates due to low yields and geopolitical tensions according to the Official Monetary and Financial Institutions Forum.

Data from a survey conducted by the think tank, published on Tuesday, contradicts the idea that countries are seeking to diversify their reserves away from the dollar.

18% of reserve managers surveyed said they intend to boost their USD reserves over the next 12 to 24 months, more than in any other currency. They cited the dollar's role in global trade and higher relative return expectations as reasons.

Gold accumulation

The survey also found that central banks plan to continue increasing their exposure to gold, a trend that has already helped the precious metal rise to record highs this year.

The survey found that around 15% of respondents expect their exposure to gold to increase this year. If that happens, this would mean that an additional $600 billion in reserves would consist of gold in the coming years.

Stay away from the yuan

On the other hand, demand for the Chinese currency has stalled among reserve managers. About 12% of the 73 central bank reserve managers surveyed plan to reduce their yuan holdings over the next 12 to 24 months, while 13% plan to increase them.

In 2023, only 3% said they intended to reduce their yuan holdings, while none did so in 2022 or 2021 when more than 30% of respondents said they planned to increase their exposure to the Chinese currency.

In the long term, reserve managers still expect their exposure to the Chinese currency to increase.

China's 10-year bond yield is around 2.3% compared to 4.5% for 10-year U.S. Treasury bonds.

This article was translated from Arabic with the assistance of AI