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Global central banks sold 30% of their holdings in emerging market currencies from FX reserves in the second quarter, according to Citigroup research. Reserve managers divested as much as $20bn in their holdings as the Brazilian real to the Indian rupee tumbled amid expectations that the Fed Reserve would scale back monetary stimulus - draining easy capital and stalling economic growth in developing nations. The decline in allocation to emerging markets was a reversal of central banks' practice of diversifying their reserves from dollars and euros. In the newest development, Moody's has downgraded its outlook on Brazil to stable from positive. The Brazilian real has fallen 6.9% to 2.2025 per US dollar since May 22 when Fed Chairman Bernanke first hinted at the tapering of QE. (VIEW LINK)


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