India, China and other countries start dumping US dollar and buy Euro
Bala Vaddi, Special Correspondent
November 27, 2004
The India, China and other countries have started dumping US Dollar quietly and buying Euro. That put a very serious pressure on 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 some traders, there are many other countries specially 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 canít 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