Dollar Woes. AT. The
Bank of International Settlements (BIS), which acts as a bank for the
world's central banks, has just released a study showing that the ratio
of dollar deposits held in Asian offshore reserves declined to 67% in
September, down from 81% in the third quarter of 2001. India
was the biggest seller, reducing its dollar assets from 68% of total
reserves to just 43%. China, which directly links the yuan to the
dollar and is under US pressure to allow a freer movement of its
currency, trimmed the dollar share from 83% to 68%.
conforms with global trends as central banks seek a buffer from the
burgeoning US trade and budget deficits. A separate survey by
European-based Central Banking Publications found that 29 of 65 nations
surveyed were cutting back on the dollar and 39 were buying more euros.
America's annual budget deficit of US$500 billion is largely funded by
Asian purchases of US government bonds, mostly from China and Japan.
The US trade and current account deficits are in a similar plight: it
took $530 billion of foreign capital to finance US imports in 2003 and
$650 billion last year. Projections for 2005 range up to $800 billion. [John Robb's Weblog]