- The India, China and other countries have started dumping
the US Dollar quietly and buying the Euro. That has put a very serious
pressure on the US Dollar. Chinese and Indian central bank officials denied
such reports. But Foreign exchange traders say they are quite convinced
of Indian and Chinese moves. According to some traders, there are many
other countries, especially oil rich Middle Eastern countries, running
away from dollar.
- Reserve Bank of India (RBI) Governor Y.V. Reddy said
the composition of the country's foreign exchange reserves could change
when asked on Wednesday if the bank was considering boosting its holdings
of the strengthening euro. The central bank does not give a breakdown of
its reserves -- the world's fifth largest -- but analysts said it may already
have reduced the proportion of dollar holdings and would likely continue
to do so. India's reserves, which comprise dollars, euros, sterling and
yen in undisclosed proportions, have risen by nearly $23 billion so far
in 2004 to a record $123.5 billion.
- "The question of composition of reserves ... it's
a very dynamic situation. You can't take a view on a daily basis,"
Governor Y.V. Reddy told reporters on the sidelines of a news conference.
- The dollar has long been held as a reserve currency,
but the single European currency hit a record high against it on Tuesday,
and again on Wednesday, after the Russian central bank said it could review
the share of euros it holds among its $113 billion in reserves. Asian central
banks have been among the largest buyers of dollars as the economic tide
turned in their countries' favour leading to massive investment and trade
inflows. These banks were partly looking to build up their ammunition following
a crisis in 1997 and to protect their trade competitiveness.
- But the U.S. unit has declined sharply because of doubts
about the fundamentals of the U.S. economy, which is running wide fiscal
and trade deficits. It has fallen nearly 4.5 percent against the euro so
far in 2004.
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