According to the IMF data, central banks worldwide cut their euro holdings to just 22% of global FX reserves by the end of 2014.
The reserve managers of central banks sold €100 billion in anticipation of losses tied to the European authorities’ attempt to boost growth by increasing money supply.
“As a reserve currency, the euro is falling apart,” said Daniel Fermon, a strategist at Societe Generale SA in Paris. “As long as you have full quantitative easing, there’s no need to invest. The problem for the moment is we don’t see a floor for the currency. Money’s flowing out.”
The IMF data shows that central banks sold euro in every quarter of 2014. Owing to the start of quantitative easing in the eurozone, this tendency is expected to remain in 2015 too.
By September 2016, the money issue will amount to €1.1 trillion of QE bond purchases. The program started in March. Since September, the European Central Bank issued €310 billion as long-term credits.
Despite the disagreement on timing, most investors are sure that the euro will cost less than the US dollar. There is only 5% left for the exchange rates of the greenback and euro to reach parity. It may take around 8.5 weeks as the euro fell 31% in 49 weeks that is 0.6% a week on average.
