RPT-Czech c.bank diversifies FX reserves out of dollars

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By Marek Petrus

PRAGUE, April 18 (Reuters) - The Czech central bank (CNB) has reduced U.S. dollar holdings from 47.2 percent of its foreign exchange reserves at the end of 2005 to 34.6 percent now, a CNB official said on Wednesday.

The reduction in the reserves, which amount to nearly 24 billion euros ($32 billion), has been mainly in favour of the British pound and the Japanese yen, CNB board member Vladimir Tomsik told Reuters.

It allocates 4.5 percent of reserves to the pound and 4.3 percent to the yen.

The news chimes with the picture of a number of central banks shifting their swelling reserves out of the weak dollar, which fell to a 26-year low against sterling and neared an all-time low versus the euro on Wednesday.

Euros account for 55.4 percent of reserves, Tomsik said, up from 51.3 percent at the end of 2005. The Czech Republic pledged to adopt the euro when it joined the European Union in 2004.

"The reason for the diversification is mainly an effort to stabilise their return in terms of lowering their volatility," said Tomsik in a written response to Reuters questions.

Tomsik oversees the management of the CNB's reserves.

"Decisions, which the CNB is implementing on the market, have been and still are spread over time so that the impact of market developments on the CNB as well as the impact of heightened liquidity on the market was limited," he added.

Gold and Special Drawing Rights (SDRs) -- an international reserve asset created by the International Monetary Fund in 1969 to supplement the official reserves of member countries - make up 1.2 percent, compared with 1.5 percent at end-2005.

Czech reserves have risen over the past decade as a result of the CNB's intervention to stem the rise in the crown and from direct purchases of the government's foreign currency receipts from sales of state-held assets.

CNB data as of end-March put the value of official reserves at 23.76 billion euros or $31.64 billion.

Speculation that world central banks may diversify some of their reserves into other currencies such as the euro was one of the factors that contributed to dollar weakness in 2006.

Countries including China, Russia, Sweden and Iran have also cut dollar allocation in their reserves.