3 Apr 2015
IMF COFER: Central banks actually bought Euro modestly during this decline – BTMU
FXStreet (Barcelona) - Reviewing the IMF COFER FX reserves data, the Bank of Tokyo-Mitsubishi UFJ Team, believes that the decline in nominal percentage terms doesn’t tell the true story for the euro, as after stripping out the EUR’s depreciation, an argument can be made that central banks have in fact bought USD 17bn worth of the euro.
Key Quotes
“By our calculations, when stripping out the euro depreciation effect, global central banks were modest buyers of euros in Q4, to the tune of USD 3.6bn worth. In fact over 2014 as a whole, central banks bought USD 17bn worth.”
“Still, given the scale of the drop in EUR/USD in H2 2014 and given that central banks have a tendency to buy the euro on dips, an argument can still be made that sentiment is turning against the euro.”
“Indeed, the last time when EUR valuations were so negative – Q1 & Q2 2010 – central banks were heavy buyers of the euro and that was when the Greek crisis was escalating. When the euro plunged in Q1 & Q2 2010, central banks bought a huge USD 184bn worth.”
“There is certainly a case to be made that the compression in yields, perhaps coupled with uncertainty over Greece, is fuelling a major shift in central banks’ willingness to hold the euro.”
Key Quotes
“By our calculations, when stripping out the euro depreciation effect, global central banks were modest buyers of euros in Q4, to the tune of USD 3.6bn worth. In fact over 2014 as a whole, central banks bought USD 17bn worth.”
“Still, given the scale of the drop in EUR/USD in H2 2014 and given that central banks have a tendency to buy the euro on dips, an argument can still be made that sentiment is turning against the euro.”
“Indeed, the last time when EUR valuations were so negative – Q1 & Q2 2010 – central banks were heavy buyers of the euro and that was when the Greek crisis was escalating. When the euro plunged in Q1 & Q2 2010, central banks bought a huge USD 184bn worth.”
“There is certainly a case to be made that the compression in yields, perhaps coupled with uncertainty over Greece, is fuelling a major shift in central banks’ willingness to hold the euro.”