I have mentioned reading commentaries from Jyske Bank in the past. In today's currency report (the link is to a PDF) they reference an IMF report, that I was unable to find, that shows the British pound has been attracting flows as a reserve currency at the euro's expense. Without saying why, Jyske sees the trend continuing.
I have written quite a few times about the dollar having to share the role of world reserve currency in the future, most likely with the euro. I hadn't thought about the pound in this light and will try to find more on this. If you come across anything along these lines feel free to leave a link.
If this idea ends up bearing fruit, there is an ETF that owns the pound that trades under ticker FXB.
By the way Bob Pisani just gave a stagflation shout on the air, so much for my Bookvar prediction.
Wikinvest Wire
3 comments:
Well the British pound has been the world's reserve currency before. That counts for something, I think.
The Jyske commentary actually mentioned that point.
From here, I am afraid it seems pretty unlikely that the Pound can regain significant reserve currency status. Sure, some central banks will hold Sterling as part of a diversified basket of currencies (particularly central banks of countries that trade heavily with the UK) but ancient history is unlikely to be too much help. By all means, see the Pound as a way into the Euro (sometime over the next twenty odd years) but surely not as a major player solo. In the recent past, the Pound has been strong, but the main reasons for strength (high yield vs USD/EUR etc; relatively serence economic progress) have been falling away and the focus could return to a balance of payments picture and a governemnt funding picture almost as horrible as that for the Dollar. Sure, that may be a cyclical rather than structural issue, but it ain't going to help...
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