According to Derek Halpenny, senior currency economist at Bank of Tokyo-Mitsubishi UFJ, there is strong evidence to suggest that the importance of reserve diversification by the world’s central banks has been overstated.
Halpenny feels that the end of the cycle of interest rate increases in the US has caused market participants to search for what will be the next driver of the dollar’s value. “The market is starting to look at how the US will fund its current account deficit,” he says.
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