BASEL, Switzerland (Kyodo) The yen has been replaced by the British pound as the third-largest component of reserve currencies held by central banks worldwide, the Bank for International Settlements said in a report Sunday.

“The decline in Japanese asset prices and the subsequent long period of low relative returns on yen assets appear to have contributed to the shift out of yen reserves,” leading the pound to become the third-largest currency component in reserve portfolios and the yen fourth, the BIS said in its quarterly review.

While the Bank of Japan recently lifted its “zero-interest-rate” policy, the Bank of England has been raising rates amid strong economic growth, making the pound increasingly attractive, analysts said.

The yen could lose further ground if Japan maintains its low interest rates, they added.

According to the BIS report, reserves held by monetary authorities worldwide totaled $4.9 trillion at the end of March, equivalent to 11 percent of world gross domestic product.

The yen accounted for more than 10 percent of reserves at its peak in the 1980s, but its share has steadily declined since the early 1990s and now accounts for less than 5 percent of the global total.

The share of the pound, on the other hand, doubled between 1995 and 2006, from 5 percent of reserves to almost 12 percent, it said.

The report indicates that nations are increasingly reallocating their reserves away from the dollar to the euro.

The dollar’s share of currency reserves peaked in 2001 at about 70 percent. As of March, its share had fallen to 66 percent, according to the report.

The share of reserves in the euro stands at 24 percent, up from around 20 percent when the currency was introduced in January 1999, the BIS said.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.