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The pound could lose its reserve currency status due to Brexit


Brexit could shake the pound sterling's status as a global reserve currency. This is evidenced by the results of a survey conducted recently by the Central Banking Publications.

75% of the 80 financial managers of central banks that participated in the survey predict that financial institutions will reduce the share of assets in pounds on their balance sheets.

Such a scenario is expected to weaken the British currency and increase the cost of borrowing for the UK government, which has long benefited from the popularity of the pound as a reserve currency.

"It is obvious that managers predict the potential impact of Brexit on the fate of assets that are expressed in sterling. The exit of the UK from the EU is associated with uncertainty and volatility, which the managers do not like. They find Brexit devastating," said Nick Carver of Central Banking Publications.

Today, the pound sterling is the fourth most popular currency after the dollar, euro and yen.

According to the IMF, assets denominated in pounds account for about 4.5% of official reserves. Since the referendum on the membership of Great Britain in the EU, the volume of dollar reserves in sterling-nominated assets remained unchanged. Most likely, this indicates that the managers want to wait for information on the terms of the deal between London and Brussels to appear before they make decisions.

Recall that earlier this month the Brexit deadline was extended until the end of October of this year.

The material has been provided by InstaForex Company -