Funny what a European debt crisis can do to the appeal of the dollar.

It wasn't so long ago that experts were predicting that the dollar would soon cease to be a major reserve currency. Well, don't hold your breath. Data released at the very end of 2011 show that dollar reserves were maintaining at roughly 61.7 percent of all reserves at the end of the third quarter, while euro reserves declined by about 0.9 percent in the first nine months of 2011, and 1.5 percent since the beginning of the debt crisis.

Now, the dollar isn't exactly winning popularity contests. While Switzerland and Japan added to their dollar holdings, developing countries shed dollars, according to an analysis by Alan Ruskin, global head of G10 FX strategy at Deutsche Bank.

Still, he says, other major currencies like the yen have been unable to break into the reserve-currency big leagues, making reserves increasingly the province of the dollar and the euro.

And the overall trend right now, he says, "fits with thoughts that the glacial reduction in the USD reserve status has flattened out, while the EUR’s reserve share has peaked, and more tentatively taken over a ‘glacial’ decline trend from the USD, that has potential to accelerate."

Ruskin doesn't see demand for euro reserves picking up until there are clear signs of resolution of the debt crisis.

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CURRENCY FUTURES

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