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Drumroll, please. The International Monetary Fund's quarterly tally of central bank foreign exchange reserve holdings has just been released. The largest allocation—at 62.1 percent—is given over to the U.S. dollar. No, no surprise there, but still, the trend away from the greenback is telling. Year-over-year, the world's dollar commitments, as a percentage of allocated reserves, shrank 0.5 percent from 2008's fourth quarter. In the past decade, dollar reserve allocations have declined a total of 8.5 percent. Much of the slack has been taken up by the euro. Last year, euro commitments rose 1.6 percent, bringing its decade-long growth rate to 9.0 percent. Now, 27.4 percent of global reserves are committed to euros. Global Central Bank Reserve Allocations 
Source: IMF Smaller—much smaller—allocations are held in other currencies, principally the pound sterling, Japanese yen and the Swiss franc. In recent years, central banks have been diversifying their reserve holdings to better manage currency risk. Reserves holdings of British pounds, for example, had been on the rise between 2004 and 2007, but flattened out in 2008 as the U.K. economy faltered. Commitments to sterling in 2009, however, grew by 40 basis points to 4.3 percent of allocated reserves. Yen commitments declined 10 basis points to 3.0 percent last year in a resumption of the shunning during Japan's "Lost Decade." Swiss franc allocations remain stable at 0.1 percent. The banks' diversification strategy is best evidenced by the 1.5 percent uptick in allocations to "Other" currencies—a miscellany that includes so-called commodity currencies such as Canadian and Australian dollars and the South African rand. The U.S. dollar's hegemony as the world's reserve currency continues to be chipped away—a "good news, bad news" story for American policymakers. A primary advantage of reserve currency status is a more favorable global loan market and the facilitation of large trade deficits, a rather addictive state for an economy trying to spend its way out of a deep recession. A Note On Today's Monetary Inflation Rate The real-time monetary inflation rate (see subhead above) flipped into negative territory today, reflecting a resurgence in the dollar's gold purchasing power vis-a-vis the euro. Please note that this reading reflects the change in the dollar's value over the past 365 days. In other words, the buck is worth relatively more (put another way, its inflation rate declined) since March 31, 2009. The Monetary Inflation Index level on March 31, 2009 is marked by a yellow circle in the chart below. Note that there has been a lot of daily volatility in the index over the past two years. In the long term—that is, since the introduction of the euro in 1999—the average annual rate of dollar inflation is 3.5 percent. Real-Time Monetary Inflation Index 
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