The market is missing a point about currency reserves

While there is no doubt that a diversification of global currency reserves or the introduction of an alternative reserve currency would be momentous, they are far from being immediate risks. In our view the market is focusing on the wrong issue. By Ian Stannard, senior currency strategist, BNP Paribas.

The FX market has become obsessed with central bank currency reserves and the prospect of diversification away from the USD. This has been fuelled by the recent meetings of global policymakers under the G20/G8 framework and increasingly candid comments on the subject from the largest currency reserve managers, namely China and Russia. Various suggestions have been put forward for an alternative global reserve currency, including expanded special drawing rights to incorporate the yuan and rouble.

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