Asian governments spent around $50 billion in foreign exchange reserves last month – the highest level since March 2020 – to defend their currencies against a relentless rise in the US dollar.

Exante Data Inc., a firm specializing in tracking global capital flows, estimates that emerging Asian countries excluding China spent nearly $30 billion in dollar sales in the spot market alone. ‘in September. That number rises to $50 billion when Japan is included.

Dollar sales in the region in the first nine months of the year reached around $89 billion including Japan, marking the busiest period for foreign exchange spending since at least 2008, according to Exante. The company bases its estimates on data from central banks and other government authorities and adjusts them for changes in exchange rates.

The increase comes as the Bloomberg Dollar Spot Index, which measures the greenback against a basket of other major currencies, trades at a record high following the most aggressive interest rate hike in years. 1980. The surge in the greenback reduced the value of the stock of other currencies in the portfolios of central banks.

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While recent dollar selling by countries like South Korea, India, Taiwan and Japan has been widely publicized, activity in other countries has been documented primarily through central bank reports. In addition to Japan’s $20 billion in sales in September, South Korea sold about $17 billion, according to Exante, based on data currently available from the country’s central bank. Hong Kong, the Philippines, Taiwan and Thailand were also net sellers of dollars for the month of September, according to the firm.

“Their currencies are under pressure from rising interest rates,” said Alex Etra, senior strategist at Exante. “There is an unusual degree of uncertainty about high US interest rates.”

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The pace of intervention may not be over as the yen fell to its lowest level in more than 30 years on Thursday, bringing back speculation of possible action by Japanese authorities after activity resumed last month. .

To be sure, Asian governments have frequently resorted to interventions in foreign exchange markets in the past to slow or control volatility, as well as to weaken currencies. But last month’s dollar sales exceed volumes seen at the start of the pandemic in March 2020.

The fall in reserves could come in part from a broader reallocation of assets as well as falling valuations, Etra said. But to a large extent, central banks need to sell reserves to have liquidity on hand.

Foreign exchange reserves are dwindling all over the world. The stock of global reserves has shrunk by more than $1 trillion, or 8.9%, this year to less than $12 trillion, the biggest drop since Bloomberg began compiling the data in 2003.

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