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Forex pairs in this Article » EUR/USD (Barcelona) - Sebastien Galy, Currency strategist at Societe Generale notes that Central banks have vast EUR foreign reserves, to use these for USD interventions they would need to swap these assets back into EUR.

Key Quotes:

“Having a look at the cross currency market there is a gentle bid for the EUR which neither confirms or infirms the previous assumption”.

“Another approach is to look at the performance of reserves relative to moves in the currency markets, curves and accruals. There the unexplained components are FX interventions and tactical allocation as well as errors. The suggestion is actually that demand for EUR has been falling”

“It is not obvious what impact foreign interventions have on EUR/USD, probably positive given the higher usage of USD for interventions. What matters far more is the realization a few years late that central banks hold very short durations, probably around 1 year down from 1.5 a few months ago which is unhelpful for holders of longer term maturities mainly in the US and to a far lesser extent in Europe”.
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