Foreign exchange reserves Hey, guys, do you know? Under the global geopolitical tensions, central banks of various countries are busy buying **! What are they doing here? It turns out that they want to diversify their foreign exchange reserves and no longer rely only on the US dollar. Bob Minter, director of strategy at Aberdeen Standard Investments, said the move was a strategic shift in response to an uncertain financial environment. Their goal is to get rid of the hegemony of the dollar.
Minter also said that over the past four terms, the dollar has been used as a tool of U.S. foreign policy. Since then, the United States has been pushing emerging market countries to diversify their foreign exchange reserves. He also emphasized the role of the dollar in foreign policy, using the status of a reserve currency as a diplomatic tool. He feels that the central bank's act of buying ** is actually an expression of political neutrality, that is, to reduce the kind of dependence on the dollar.
In this context of uncertain global financial conditions, it is regarded as a key safe-haven asset and a tool for currency hardening. "* can make the currency harder, not with that kind of cryptocurrency," Minter said. "Compared to the volatility of cryptocurrencies, there is lasting value and stability.
The central bank's ** purchase has exceeded 1,000 tons for two consecutive years, which is a record high. Analysts believe that one of the reasons why central banks continue to buy ** is that they want to reduce the proportion of the dollar in foreign exchange reserves, and they also want to deal with the risks caused by the shock of global inflation, policy interest rate hikes in developed markets, and the valuation loss of foreign exchange reserves of emerging market central banks.
Because confidence in the bond market, especially in U.S. Treasuries, has declined, central banks have turned to diversify their foreign exchange reserves. Analysts at ANZ Bank said that U.S. Treasury bonds account for about 59% of the world's total foreign exchange reserves, but with the Federal Reserve's monetary tightening policy, which has led to the loss of bonds, the central bank has begun to look for ways to diversify foreign exchange reserves.
Financial analyst Jim Grant also warned that the bond market could usher in a "generational bear market" and that the upward trend in interest rates could continue for decades. In this case, ** as a stable safe-haven asset is particularly popular, and the trend of central banks buying ** is likely to continue.
Overall, the global monetary system is undergoing a transformation, and this central bank purchase of ** will promote the diversification of foreign exchange reserves. With the development of a multi-currency system, ** may play an even more important role in the future.