ECB’s Measures are Dimming the Euro’s Appeal

The European Central Bank’s unprecedented stimulus measures are starting to dim the euro’s allure among the managers of foreign-exchange reserves.

After climbing for three straight quarters, the currency’s share of central-bank reserves identified by the International Monetary Fund in a June 30 report was unchanged at 24.5 percent from January through March, down from a record 28 percent in 2009. The euro was less attractive than a year earlier for 62 percent of central banks that took part in a private survey by Central Banking Publications released on June 23.

The interest-rate cuts, charge on deposits and liquidity programs that the Frankfurt-based central bank has implemented since early June to avoid deflation have made the 18-nation euro less attractive. Banks from JPMorgan Chase & Co. to Societe Generale SA predict the euro will lose out to currencies such as South Korea’s won and the Australian dollar, favored for the higher yields paid by their fixed-income markets.

Bloomberg

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