Deutsche Bank: Sterling risks losing reserve currency status
Samuel Gee, News Editor
27 Jan 2017, 11:17 a.m.
The recent decline in the value of the pound has led Deutsche Bank to claim that its status as a reserve currency is under threat. The German bank cited the minimal impact of sterling’s fall in 2016 on other currencies, alongside its falling presence in China’s reserves, as evidence of sterling's increasing irrelevance as a foreign exchange reserve currency.
The German bank have predicted that Brexit could be the final straw for the pound’s reserve status. With foreign demand for sterling such an important inflow into the UK economy, any sudden decline in reserve holdings of sterling could leave a significant hole in Britain’s budget.
The pound currently accounts for 4.5% of global foreign exchange reserves. Should it fall below 3%, sterling could no longer be considered a reserve currency and the UK’s sovereign credit rating would be cut.