Thus, the successful passage of the tax reform bill in Germany was barely acknowledged in exchange rate movements while the surprisingly large growth in US GDP in the second quarter was reflected rather quickly in a corresponding fall in the euro exchange rate. Apparently, the uncertainties associated with the euro area received more attention than those affecting the US economy.
Exchange rates do not, however, consistently move in only one direction. Cyclical developments may revive the diversification argument as a strategic consideration. Moreover, empirical studies support the view that the composition of foreign exchange reserves to some extent reflects the structure of external trade and financial ties.