Summary Of IMF’s COFER Report

The IMF published its quarterly central bank reserve data. It is now updated through the second quarter. The dollar value of global reserves rose to $11.12 trillion. It represents about a $218.5 bln increase in the quarter and $150.1 bln since the end of Q2 16. 

The most important development in currency reserves is the gradual shift of China’s holdings from unallocated to allocated reserves.

Previously, China would not reveal the currency allocation of its reserves. Reportedly China has agreed to accept the best practices of the IMF. However, it is slowly reporting the allocation of its reserves to protect some of its confidentiality. It appears that China has shifted about half of its reserves from unallocated to allocated. This suggests the process may take another one to two years to complete. 

Unallocated reserves have fallen from $2.91 trillion in June 2016 to $1.86 trillion. The allocated reserves have risen to $9.26 trillion from $8.06 trillion. The share of reserves that are allocated has risen from about 64% in mid-2015 to more than 83% in Q2 17. The individual currency shares have not changed dramatically, suggesting that China’s allocations were not far from the weighted average.

Specifically, the dollar’s share of allocated reserves stood at 63.8% at the end of June. This is a small decline from the 65.3% share two years ago. The euro’s share stood at 19.9% at the end of Q2 17, virtually unchanged from Q2 15. The yen’s share has risen from 3.6% to 4.6%. Sterling’s share is also little changed (by that we mean less than 0.20% different over the past two years). The same can be said of the Australian and Canadian dollars.

Of interest, the share of reserves that are kept in other currencies had fallen from 2.9% in mid-2015 to 2.30% at the end of Q2 17. One thing that had changed over the period is that China’s yuan has been broken out. The first time was for Q4 16. Then yuan reserves were valued at $90.78 bln or 1.08% of allocated reserves. As of the end of June, yuan holdings have risen to $99.36 bln or 1.07%. Over the period from mid-2015 through mid-2017, the yuan depreciated by 8.6% against the dollar. This implies that increase in yuan holdings is more than valuation shifts would suggest, which in turn means that there has been some increase in the quantity of yuan being held in reserves.