Tags: central banks | riskier | currencies | reserves

Survey: Central Bankers Diversifying into Riskier Assets

By    |   Tuesday, 09 April 2013 07:48 AM

Central bankers have diversified into riskier assets, such as equities and lower-rated government bonds, a new survey shows.

Central bankers around the world have traditionally put their reserves in U.S. Treasurys and government bonds of the safest European countries, but they’re expanding into currencies like the Australian and Canadian dollar, Scandinavian currencies and the Chinese renminbi, according to the survey by Central Banking Publications, a trade journal, and the Royal Bank of Scotland, the Financial Times reports.

Approximately 80 percent of the 60 central bankers polled said they have purchased or would consider purchasing Australian or Canadian dollars. Over 40 percent have already purchased or would consider the renminbi, about half have invested in or were considering Scandinavian currencies and the New Zealand dollar and 14 percent have bought or were considering the Brazilian real.

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What’s more, 30 percent said they might invest in equities, according to the Times.

The central bankers participating in the survey, largely based in Asia and the Middle East, oversee $6.7 trillion.

The central bankers say current low yields of traditional assets and the falling dollar and euro have prompted them into riskier assets, the Times notes. Over four-fifths of the central bankers polled point to the aggressive monetary easing of the European Central Bank and the Federal Reserve is encouraging them to explore different currencies.

In an attempt to revive their economies, the Fed and other major central banks have set interest rates at record-low levels and pushed down the value of their currencies to try to increase exports.

The survey participants say increasing investments in other currencies would stabilize financial markets around the world, but the emerging trend has frightened foreign-exchange investors, the Times reports.

In addition, the central bankers still use credit rating agencies extensively, even though Group of 20 major industrialized countries is trying to encourage investors to rely less on the credit-rating agencies.

Data from the International Monetary Fund also show that central banks are diversifying into different currencies. Their proportion of reserves held in nontraditional currencies increased to a record-high 6.1 percent in the fourth quarter, The Wall Street Journal reports.

Still, most remain held in U.S. dollars, euros, British pounds, Japanese yen and Swiss francs.

The proportion held in the U.S. dollar dropped from 62.1 percent in the third quarter to 61.9 percent in the fourth.

While rating agencies have downgraded U.S. and U.K. debt in recent years, Australia and Canada have AAA ratings.

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Central bankers have diversified into riskier assets, such as equities and lower-rated government bonds, a new survey shows.
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2013-48-09
Tuesday, 09 April 2013 07:48 AM
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