Foreign Exchange Reserves and the Reserve Bank’s Balance Sheet

Christian Vallence
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Christian Vallence: Reserve Bank of Australia

RBA Bulletin (Print copy discontinued), 2012, 57-64

Abstract: The Reserve Bank of Australia holds and manages the nation’s foreign exchange reserve assets in order to meet its policy objectives. While Australia’s foreign exchange reserves are relatively modest by international standards, they nonetheless constitute a sizeable portion of the Bank’s balance sheet, and variations in the Australian dollar value of these reserves are usually the most volatile component of the Bank’s profit and loss statement. This article discusses some of the key decisions faced by the Bank in holding and managing Australia’s foreign exchange reserves, including the appropriate size of reserve holdings, the way in which they are acquired, and risk management strategies. Each of these decisions involves a trade-off between policy capacity, and financial costs and risks to the Bank’s balance sheet.

Keywords: foreign exchange reserves; foreign currency reserves; reserves management; Reserve Bank of Australia; balance sheet risk; Reserves adequacy (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (6)

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