The latest data on deployment of foreign currency assets shows that sovereign securities still hold a lion’s share of the investments at 61% as of end March. Of this, more than 90% is in US Treasuries. Around 31% of forex assets were deployed into deposits of other central banks, the International Monetary Fund and Bank for International Settlements, while 7.6% were put into commercial bank deposits and funds. The share of commercial bank deposits in total investment has risen steadily over the last five years after it was brought down sharply in the aftermath of the global financial crisis in 2008. But the share is in single digits and hardly close to the 20-25% seen prior to the crisis.
Yen reaches 14-year high in global forex reserves
Japan’s currency is taking a larger share of global forex reserves, in a pattern that’s coinciding with the International Monetary Fund (IMF) gradually incorporating China’s holdings into its published data. The yen is now at its highest proportion since the end of 2002. In the second quarter, it accounted for $429 billion out of the $9.26 trillion worth of reserve holdings for which IMF specifies the currency allocation. While total reserves stood at $11.12 trillion, the fund reveals the currency breakdowns for only 83.3% of that, per agreement with members who prefer not to report their ratios. Japan’s currency is the third-largest component of global reserves in IMF data, after the dollar and euro. China’s yuan slots in seventh place, also being behind the British pound, and Australian and Canadian dollars. Bloomberg
October is the most volatile month for markets
It’s been a calm year for US equities, but if history is any indicator, that’s about to change. October is the month with the highest share of daily moves of 1% or more in either direction for the S&P 500, according to 50 years of data compiled by Bloomberg. That would be a change from this year’s steady markets. The S&P 500 has moved 1% or more in either direction on 4.3% of this year’s trading days through September, a rate that if it lasts through the end of the year would make 2017 the least volatile stretch on record. Bloomberg
