The Swiss National Bank's foreign currency reserves shrank during the third quarter, data showed on Thursday, as weakening global stock and US Dollar Index took their toll. According to the Swiss National Bank's quarterly report, the central bank's foreign currency reserves dropped to CHF 645.7 billion during the third quarter, down from CHF 656.7 billion in the second quarter. The decrease was largely attributed to the weakening of the US Dollar Index, which dropped from 97.8 to 94.9 over the quarter.
At the same time, the personal consumption expenditures (PCE) price index, a measure of inflation, rose 0.1% last month after climbing 0.4% in October. This increase was driven by rising prices for gasoline, food, and housing, and could point to an uptick in consumer spending.
Meanwhile, global equity indexes have been suffering heavy losses due to the Bank of Japan's decision to keep its monetary policy unchanged. The Nikkei 225 index fell to its lowest levels since October 2016, while the Shanghai Composite index dropped to its lowest level since October 2014.
After rising for five consecutive weeks, India's forex kitty dropped $571 million to $563.5 billion for the week ended December 16. This was due to a decrease in foreign currency assets, which declined by $620 million to $531.7 billion. The Indian rupee depreciated against the US dollar during the week, which could be a sign of further forex reserve losses in the near future.
The FX board entered a low volatility consolidative phase, typical of the last two weeks of the year, on Thursday. The US Dollar recovered its shine on Thursday, and despite still trading within a tight range, the greenback was up against most of its major peers. There was some heavy selling in US equity futures after the economic data and that was coupled with buying the US dollar.
In conclusion, it appears that the Swiss National Bank's foreign currency reserves shrank during the third quarter due to weakening global stock markets and a declining US Dollar Index. At the same time, the PCE price index rose 0.1% last month, signaling an uptick in consumer spending. Global equity indexes have also been suffering heavy losses due to the Bank of Japan's decision to keep its monetary policy unchanged, while India's forex kitty dropped $571 million amid a depreciating rupee. Finally, the FX board entered a low volatility consolidative phase on Thursday, while the US Dollar recovered its shine and was up against most of its major peers.
