Global Reserves Accumulation

Background:

Global central banks added trillions of dollars in foreign exchange reserves as they first sought to lower financial vulnerabilities and by intervening in foreign exchange markets. By mid 2008, the global reserve stock exceeded US$7 trillion, fuelled by the rapid increase in reserve accumulation in China, as well as Russia and other emerging market economies. The largest reserve stocks are to be found in Asia, in China and Japan. Russia, Singapore, Taiwan, Hong Kong and India also have well several US$100 billions in reserves. As the financial crisis hit, the pressure on emerging market assets, led central banks to spend their reserves, leading to a significant fall in the reserves of South Korea, Russia, and others. However by mid 2009, the reversal in capital flows back to emerging markets has led to an increase in central bank intervention to slow appreciation of their currencies and thus reserve accumulation.