IMF gives $A a vote of confidence
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SYDNEY, Nov 20 AAP
November 20 2012, 2:47PM
The likely inclusion of the Australian dollar in a key survey of central foreign exchange reserves is a vote of confidence in the currency.
The survey, Currency Composition of Official Foreign Exchange Reserves (COFER), is published by the International Monetary Fund (INF) every quarter.
In August, the IMF released a report recommending the Australian dollar's explicit inclusion in the COFER survey results.
Until now, the COFER survey data showed central bank holdings of only five major currencies, with a residual category lumping together 10 other currencies including the Australian dollar.
The report recommended that, because more than one central bank reported holdings of them, both the Australian dollar and the Canadian dollar be given separate coverage in the COFER data.
In a guidance note issued last week, the IMF executive board said it "broadly supported" moves to improve the IMF's data, including the COFER survey, implying the Australian dollar will soon be included under its own name in the quarterly statistics.
"I think the increased market activity from central banks has caught the attention of the IMF and I think this speaks to the growing prominence of the Australian dollar on the international stage," CMC foreign exchange strategist Tim Waterer said.
"The Australian dollar has long been seen as a risk currency and I think that will still be the case, but it could start to take on some more 'safe haven' type attributes now that it is being taken more seriously internationally," he said.
Central banks can hold whatever currencies they want as official reserves - the reason the reserves are "official" is that they are held by central banks, which are official bodies.
So the move to give the Australian dollar its own coverage in the COFER data set would not suddenly turn it into an official reserve currency.
But it would raise its status.
"The Australian dollar is now firmly on the radar for central banks across the globe," Mr Waterer said.
"That will keep the currency well supported and perhaps increase demand for it during periods of risk aversion where we have traditionally seen the Australian dollar deteriorated."
By Evan Schwarten and Garry Shilson-Josling