US$1tn wiped off global reserves

Central banks have been spending billions to support their currencies in response to the greenback's strength and global foreign currency reserves have shrunk by about US$1 trillion (HK$7.8 trillion) or 7.8 percent this year to US$12 trillion, the biggest drop on record, according to data compiled by Bloomberg.

Part of the slump is simply due to valuation changes. As the US dollar jumped to two-decade highs against other reserve currencies, like the euro and yen, it reduced the dollar value of the holdings of these currencies.

But the dwindling reserves also reflect the stress in the currency market that is forcing a growing number of central banks to dip into their war chests to fend off the depreciation.

Meanwhile, China debt markets lost US$1.4 billion in September for a total of US$98.2 billion pulled out of the asset class over eight months as investors shy away from a slowing economy.

In other news, the Ministry of Finance said it will issue the additional 5.5 billion yuan (HK$6.07 billion) sovereign bonds maturing in 2024 and 2027 via tender in Hong Kong next Wednesday, including an extra 3.5 billion yuan worth of bonds due 2024 with an interest rate of 2.44 percent per annum, and an additional 2 billion yuan worth of 2027 bonds carrying an interest rate of 2.75 percent.