U.S. dollar's share of reserves rises in Q1; euro's drops

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By Gertrude Chavez-Dreyfuss and Anirban Nag

NEW YORK/LONDON June 30 (Reuters) - The U.S. dollar's share of foreign exchange reserves rose for a fourth straight quarter, while the euro's hit a 13-year low, International Monetary Fund data showed on Tuesday.

The greenback's share rose in the first quarter to 64.1 percent of the total allocated reserves, equivalent to $3.887 trillion, amid expectations that the U.S. Federal Reserve is likely to tighten monetary policy at least once this year. The dollar hit a 12-year high against a basket of currencies in mid-March.

"This only goes to show that the dollar is still the world's reserve currency and will be for many, many years to come," said John Doyle, director of markets at Tempus Consulting in Washington.

"With the problems surrounding Greece, it's not a surprise that central banks and investors would want sell the euro and hold a more stable currency like the dollar," Doyle added.

The euro's share of known reserves shrank to 20.7 percent, a 13-year trough. The value of euros held in allocated or known global foreign exchange reserves fell to $1.256 trillion in the first quarter from $1.343 trillion.

Analysts said Asian central banks stepped up sales of the euro as the European Central Bank unleashed a 1-trillion-euro asset purchase program and cut interest rates to negative.

The euro had hit a 12-year low of $1.0457 on March 16 and shed over 11 percent in the first quarter.

The Swiss National Bank shocked markets by removing a cap on the franc against the euro on Jan. 15. That prompted speculation the SNB probably trimmed its exposure.

"Asian central banks have been rebalancing their holdings out of the euro," said UBS (NYSEArca: FBGX - news) currency strategist Geoff Yu. "And while the (Swiss National Bank) was a marginal buyer, the prospects of negative rates are not very appealing for these investors."

Global foreign exchange reserves fell to $11.433 trillion in the first quarter from $11.589 trillion in the fourth quarter, IMF data showed. The decline began in the third quarter of 2014.

The amount of allocated foreign exchange holdings shrank to $6.062 trillion from $6.086 trillion in the prior quarter.

Global reserves are assets of central banks held in different currencies, primarily to back their liabilities. Central banks sometimes buy and sell currencies from official international reserves to influence exchange rates. (Reporting by Anirban Nag in London and Gertrude Chavez-Dreyfuss in New York; Editing by Lisa Von Ahn)