According to J.Foley, Senior Currency Strategist at Rabobank, and demonstrated by the recent release of the Q2 world FX reserves, the ratio of reserves held in US dollars in the third quarter of 2011 was 61.8% while that ratio has increased a hair in Q2 2012, to 61.9%.
The analyst also points out that the USD maintains its supremacy helped by the scarce alternatives to the greenback. The “fiscal-cliff”, a persistent trade deficit and the recent accommodative monetary policy by the Fed are far from desirable characteristics for a reserve currency.
“Near-term we expect that demand for safe haven will boost the USD on a 1 mth view. However, the Fed’s accommodative policy will likely insure that investors are quick to reverse USD longs suggesting that bouts of USD strength will provide good selling opportunities”.