Central banks are now hoarding cash

Bloomberg and staff reporter

Central banks around the world are swapping their stockpiles of US Treasuries for cash - just in case they need to intervene in markets to bolster their currencies, while China's foreign reserves fell to a five-and-a-half-year low last month.

Foreign monetary officials purged US$29 billion (HK$226.2 billion) in Treasury securities in the week ended October 5, bringing the four-week decline in holdings to US$81 billion, according to Federal Reserve data. It's the most extreme outflow since the beginning of the pandemic in March 2020, leaving total holdings at US$2.91 trillion.

With the US dollar stronger than ever and recession risk rising, it's little surprise that central bankers are stocking their cash coffers.

Meanwhile, China's foreign reserves fell by US$25.9 billion by the end of September, decreasing 0.85 percent month-on-month to a five-and-a-half-year low of US$3.029 trillion, according to the State Administration of Foreign Exchange.

And Hong Kong's foreign reserves shrank by US$12.6 billion to US$419.2 billion over the same period, the Hong Kong Monetary Authority said.

Last Friday, the de facto central bank bought HK$1.57 billion from the market to stop the local currency weakening and breaking its peg to the US dollar.

The aggregate balance - the key gauge of cash in the banking system - will fall to HK$119.324 billion tomorrow.