Who's Got All The Cash (For Now)?
While FX Reserves may not exactly be freely spendable ready cash, they are often used a proxy for a nation that is 'wealthy'. It seems, however, from the following chart that in fact the FX reserves of the world shows a different picture than Americans might like to consider. The highest level of reserves are split between currency manipulators and resource-rich nations. China and Japan top the table, according to Bloomberg, and Saudi Arabia and Russia are rising fast up the league tables of FX horders. Just as notable is that China's FX reserves have swelled to $3.31 trillion at the end of 2012 from $286.4 billion a decade ago, representing a pace of $829 million per day. The problem is that recently China has hardly had the same appetite for the USD it exhibited in prior years. With the world apparently devaluing against a more stoic inflation-anxious China, it would seem Japan's 'horde' will dwindle fast if they ever do anything but jawbone.
As Michael McDonough of Bloomberg Briefs notes,
Since the Asian financial crisis, countries in the region have built up foreign-exchange reserves to record levels. Asia currently holds 60 percent of global reserves...
Still, the high level of foreign exchange reserves of the world’s two biggest holders - China and Japan - has raised questions over their objectives. Reserves in China, which has been accused by the U.S. of keeping its currency weak to promote exports, swelled to $3.31 trillion at the end of 2012 from $286.4 billion a decade ago, representing a pace of $829 million per day. Yet, the yuan strengthened 33 percent against the dollar in that period. Japan’s foreign reserves have ballooned since the global financial crisis because of the yen’s status as a safe haven.
China’s reserves stood at 40 percent of its GDP, while Japan’s are at 20 percent.
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