RBA reserves decline sharply during Covid-19 crisis

The foreign exchange reserve assets of the Reserve Bank of Australia have sharply fallen during the Covid-19 crisis, official data published today (September 7) shows.

Reserves have fallen from $46.7 billion in March 2020 to $33.5 billion in August. In addition, the value of the central bank’s gold holdings has decreased from $5.3 billion to $5 billion over the same period.

“Changes in the value of official reserve assets reflect purchases and sales (including swaps) of foreign exchange by the reserve bank, earnings on foreign securities and valuation effects arising from changes in the foreign currency value of the assets and exchange rates,” says the RBA.

As a result of these fluctuations, the total value of the institution’s reserves has dwindled from $90.5 billion in March to $59.6 billion in August.

During this time, the Australian dollar has appreciated against the US dollar by 26.9% to 0.73 per $1 today, in spite of the fact that the RBA lowered the cash rate to a record low of 0.25% in March 2020. This has coincided with the weakening of the US dollar against other currencies, partly as a result of the Fed’s implementation of ultra-loose policies to tackle the pandemic.