Bank of America Global Global Research discusses how reserve managers are likely dealing with the current string USD levels.
"The answer likely lies in between, i.e. reserve managers likely respond to changes in the USD conditional on their fair-value USD estimates, with the pace of USD moves also a critical consideration. Looking back, we find the USD level to have correlated both more strongly (in absolute values) and more consistently with the accumulation of FX reserves. But the recent data could force a rethink," BofA notes.
"We show, historically, FX-adjusted changes in official reserves have correlated more consistently with the level of USD, but we would argue reserve managers likely pay at least as much attention to changes in USD and the pace thereof," BofA adds.