Central banks will be unable to preserve the value of foreign reserves in real terms if they continue with traditional asset allocation strategies – and could see significant losses if interest rates rise, according to Juan Carlos Alfaro, chief risk officer at the Latin American Reserves Fund (Flar).

Speaking at the National Asset-Liability Management seminar in São Paulo this morning, Alfaro said central banks need to rethink their traditional preference to invest in short-duration AAA and AA