Maravi

StanChart supports govt on US dollar foreign reserves

StanChart supports govt on US dollar foreign reserves
By Chiwoyu Sinyangwe
Tue 09 Feb. 2010, 09:40 CAT

STANDARD Chartered Bank has supported the government’s decision to hold its entire foreign reserves in United States dollars as gold prices are prone to extreme volatility.

The country’s gross international reserves recently hit over US$ 1.9billion from US$ 1.8billion, the highest in over 38 years, triggering debate in the country on how the reserves needed to be stored.

Some analysts contend that the country needed to keep some of the country’s gross international reserves in gold after the US dollar’s continued weakness against major convertible currencies like the euro and the British pound.

On the other hand, the international price of gold on the international market had continued to post strong performance, especially in the aftermath of the global economic recession.

Commenting on the debate, Standard Chartered Bank stated that there was need for the country to continue maintaining its gross international reserves in US dollars as opposed to gold because commodity prices were susceptible to volatility.

Standard Chartered Bank stated that although the US dollar had continued to show weakness, the country need not diversify its savings by investing in commodities like gold.

“Our view is that the government’s decision to hold its entire foreign reserves in US dollar is correct as commodity prices can be unpredictable and might even collapse,” stated Standard Chartered Bank.

“Despite recent USD weakness against other major convertible currencies, we believe that the US dollar will bounce back in first half of 2010. The US dollar began the year on strong note before losing ground midway through January. It is now currently regaining some of the losses it had made earlier and we expect this trend to continue.”

Labels: STANCHART

posted by MrK @ 4:47 PM