The daily gyrations experienced in the forex market, valued at more than $5 trillion/day, might lead some investors and consumers at some points in time to believe that the American dollar had lost its allure.

Obviously, the greenback fell precipitously below the 1.60 mark versus the euro back in 2008 and had been in a range-bound movement ever since, yet the US dollar had not lost its structural importance in the world economy, being the reserve currency of choice for central banks, companies and consumers.

The recent figures reported by 144 central banks via the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) sheds a light on the continued dominance of the dollar.

By the end of the second quarter of this year, the dollar’s share of allocated reserves that amounted to $6.1 trillion was 62 percent, around $3.8 trillion, a 4.6 percent Y/Y increase compared to Q2 2012.

The euro, meanwhile, came as a distant second with a 24 percent share, representing around $1.5 trillion, an annual decline of 1 percent.

The third and fourth spots were reserved for the pound sterling and the Japanese yen, with both representing a meager 3.8 percent of overall allocated reserves.

Additionally, the list of major foreign holders of US Treasury securities illustrates the attractiveness of government debt issued by the world’s largest economy.

By the end of September 2013, China had accumulated around $1.29 trillion followed by Japan that held USD1.2 trillion.

The fact that since 2002 the greenback had maintained its more than 60 percent share in spite of the introduction of the euro, the 2001-2002 recession following the dot-com crash and the 2008-2009 recession is a testimony of the difficulty in unseating the dollar from the top spot and the lack of viable contenders.

Ostensibly, the size of the US economy and the huge liquidity of its bond market makes it the primary investment destination for countries that have substantial external surpluses and, in turn, foreign reserves.

Where will China invest its record $3.66 trillion of foreign reserves, as reported by the end of the third quarter, if we take into consideration the fact that such amount is higher than the Gross Domestic Product (GDP) of a multitude of countries, notably Germany, the largest country in Europe.

Likewise, where will Saudi Arabia invest and deposit net foreign assets valued at $696 billion, a little bit short of its forecasted GDP of $722 billion for 2013.

Over the short-to-medium term, the absorptive capacity of the Kingdom won’t enable the full utilization of these funds domestically and, thus, the government through the Saudi Arabian Monetary Authority (SAMA) opts toward passive portfolio management, whereby 18.4 percent are deposited with banks abroad and 74 percent are invested in foreign securities, mostly in dollars.

To taper or not to taper is not the question that might heavily impact the attractiveness of dollar-denominated assets and neither will the recent reforms by Chinese authorities toward convertibility of the yuan.

The former might disrupt the demand for Treasuries over a short period of time, as witnessed during the second quarter, but will not constitute a game changer that erodes the USD share of global reserves over the long-run.

As for the yuan, convertibility requires scrapping quotas on foreign investment in the Chinese capital markets and enabling domestic companies to borrow overseas, a process, in my opinion, that will be very gradual and fraught with uncertainties.

Finally, the dollar is an integral part of the current structure of the global economy and the plight of the Euro area and the slow pace of Chinese financial reforms will ensure that it remains so.

Thus, the currency quotes may reflect the relative value of the US dollar at a given time and day versus other currencies, but that did not and will not change the accumulation patterns by central banks including SAMA.

Twitter: @ZeEconomist