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Bloomberg
India is leading a charge among Asia’s emerging-market central banks in rebuilding foreign-exchange stockpiles, which would help them defend their currencies if the dollar rebounds.
India, South Korea, Taiwan, and Southeast Asian countries have recouped about $132 billion since November — more than half of what they lost last year — by soaking up dollar inflows, with a weaker greenback also boosting their portfolio valuations, according to Bloomberg calculations based on foreign-exchange data. The rupee has lagged behind EM peers because its central bank has been most aggressive in rebuilding reserves.
These countries saw their foreign reserves drop by $243 billion in the first 10 months of 2022 as they sought to defend currencies that plunged against the dollar. Rebuilding their stockpiles may help Asia’s emerging markets withstand any potential rebound in the greenback, as some traders start pricing in higher US peak rates, which would hit demand for risk assets.
“If an investor asset reallocation back into EM/Asia continues to materialise, owing to the significant foreign portfolio outflows and underweight positioning throughout last year, we believe Asia ex-Japan central banks will broadly accumulate reserves in the coming months,†Nomura Holdings strategists said.