Nov. 20, 2012,
Aussie, Canada dollars termed reserve currencies
Marking the onset of a multi-currency reserve system and a new era in world money, the IMF formally classified two commodity-rich currencies, Australian and Canadian dollar, as official reserve assets.
In a move that will see a downgrading of the Euro & the U.S Dollar.
From next year, the International Monetary Fund can ask member countries to include the Aussie and Loonie (Australian and Canadian dollars respectively) in statistics supplied by reserve-holding nations on the make-up of their central banks’ foreign exchange reserves.
Presently, the IMF uses five currencies ( dollar, euro, sterling, yen and Swiss franc) as official reserves.
The International Monetary Fund has named the Canadian and Australian dollars as official currency-reserves in the latest IMF report.
The IMF regularly reports its so-called Composition of Foreign Exchange Reserves, or Cofer, to gauge the currency stocks of central banks around the world. The overwhelming proportion of those reserves is held in just five currencies, deemed by many investors as ultra-safe: U.S. dollars, euros, British pounds, Japanese yen and Swiss francs.
But in an appendix tucked away in the final pages of a new IMF report on statistics, the fund acknowledged the rising use of the Canadian and Australian dollars as reserve currencies among some central banks. It said a survey of countries found that of the 10 other currencies held in central bank stocks, only the Australian and Canadian dollars are held by more than two countries.
In its past reports, the IMF has lumped the two dollars—known as the loonie and the Aussie—into an "other currencies" category. But now, the IMF plans to break them out and list them separately, as it already does for the five other major currencies. The exact timing isn't clear, but it would mark the first time the IMF designated a new reserve currency since the 1999 introduction of the euro.
Practically speaking, the break-out is a technicality. The report didn't appreciably move either currency in Monday trading. But longer term, it could underpin a sense of security that has already infused trading in those currencies and assets priced in them.
David Marsh, a co-chairman of the London-based Official Monetary and Financial Institutions Forum, said the move reflects growing diversification of the world's $10.5 trillion of reserves, and "is likely over time to exert wide-ranging impact on world bond and equity markets."
Still, Mr. Marsh says that expanding the official reporting list signals a new phase in the development of reserve money. "The IMF step has both practical and symbolic importance and will almost certainly promote further asset diversification among official and private asset managers," he said.