Theme 5
Central banks navigate volatile yields and inflation risks, turning to gold as a safe-haven asset, resulting in record gold purchases during 2022, and continuing into Q1 2023.
The US dollar remains dominant as the world's reserve currency, but geopolitical concerns and emerging market opportunities drive central banks to diversify currency holdings.
Despite the US dollar's resilience, central banks increasingly allocate to emerging market currencies, seeking higher risk-adjusted returns and growth potential in developing nations.
Uncover the themes shaping the future of official institutions.
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The Central Bank foreign currency reserves management whitepaper series examines the challenges and opportunities faced by central bank reserve managers.
1 - Opportunities to expand investment horizons
Central banks have come under financial pressure as they face diminished or negative returns on traditional reserve assets. We argue the case for investment strategies based on reserve adequacy considerations rather than short-term accounting concerns.
2 - Balancing stability and return objectives
Central Banks are struggling to meet their capital preservation objectives in today’s low yield environment, how can linking a country’s external risk profile to its strategic asset allocation help them meet their objectives?
3 - Managing liquidity risk
We examine the issue of managing liquidity risk within a market environment characterised by innovation, changing regulation and potentially tighter global liquidity.
4 - Active vs passive management
The debate around active vs passive management is a familiar one, but when and how does it make sense for a central bank to actively manage?
5 - Currency composition of foreign currency reserves
Delve into the attributes of a reserve currency from a historical perspective and consider the forces at play in the 21st century.
6 - Revival of gold as a reserve asset
What role does gold play in reserve portfolios? We take a look back at gold over the modern era, and forward, to how we should consider financial innovation in relation to gold.
7 - The greening of central banks and reserves management
We explore the drivers, opportunities and challenges for reserve managers incorporating ESG considerations within traditional constraints.
