**Pound Risks Becoming Irrelevant as Brexit Dims Reserve Status
The fallout from the U.K.’s vote to exit the European Union includes the risk of the pound losing favor as a place for safe-keeping by global managers and their $11 trillion stockpile of reserves.
“To the extent that reserves serve as backstops against currency stress, rather than as sovereign wealth, the pound’s diminishing role in international capital flows post-Brexit should permanently reduce its reserve status,” Robin Winkler, a London-based Deutsche Bank AG strategist wrote in a note. “The pound may offer value, but is increasingly irrelevant.”
The pound has depreciated 15 percent since Britain’s June 23 vote to exit the economic bloc, trading at $1.26 Wednesday. It reached $1.1841 on Oct. 7, the lowest since 1985.
The British currency’s share of global reserves has fallen for the last two quarters to 4.5 percent, according to the most recent International Monetary Fund quarterly Composition of Official Foreign Exchange Reserves report – dubbed as COFER data – which runs through Sept. 30. The U.S. dollar holds the largest slice at 63.3 percent, followed by the euro with 20.3 percent…
Hopes for a slow exit have dimmed this month after U.K. Prime Minister Theresa May said that she will publish her plan for negotiations to leave the EU and promised lawmakers a vote on the final exit deal.
The slimming of the pound’s share of reserves may be even worse than the IMF data may signal, given China only recently began to report allocations, added Winkler.**