Dollar slips on reserve comments

Comments from the South Korean central bank led to investor fears of a sell-off of Asian dollar reserves, resulting in a large slid in the dollar’s value.

There has already been a movement from US dollar holdings in central banks, to more diverse currency management, not least while the euro and Australian dollar are currently more attractive in the short term.

However, an actual sell-off of dollar reserves would negatively impact the value of the US dollar, when it is already at a low point in the current economic cycle.

Reassurances from Sourth Korea later in the day allayed investors that South Korea was looking at diversification, rather than a sale of reserves, helping the dollar recover some of its losses.