The central bank of Israel will add Chinese yuan to its foreign currency reserves while slashing its U.S. dollar and euro holdings. This is a move to diversify the Israeli reserve allocations and lengthen its investment horizon, Bloomberg reported.
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In addition to the yuan, the bank will also add the Canadian and Australian dollars. Previously, the bank only held US dollars, euros, and the British pound.
“We need to look at the need to earn a return on the reserves that will cover the costs of the liability,” Deputy Governor of the Bank of Israel, Andrew Abir, said in an interview with Bloomberg.
Last year, the country’s forex reserves exceeded $200 billion for the first time ever, accounting for a third of Israel’s gross domestic product.
Moving forward, the yuan will take up 2% of the bank’s reserves, and both the Canadian and Australian currencies will have 3.5% each, according to the bank’s annual report.
The reshuffle means the euro’s share will fall from 30% to 20%, and the dollar will account for 61%, down from 66.5%.
According to the International Monetary Fund, the dollar’s share of total global currency reserves has fallen to its lowest point in over two decades, sparking speculation over the rise of China’s yuan.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur