05 Mar 2021 | News & Feature

FX Reserves in February 2021: All Eyes on Rising US Treasury Yields

  • Bank Indonesia’s FX reserves were recorded at USD 138.8 billion by the end of February 2021, an increase of USD 0.8 billion from January’s figures. This is a sharp decline from the USD 2.0 billion increase in January, something driven by the recent spike in US Treasury yields and the market rout it triggered.
  • While the inflation expectations undergirding the spike in yields may be appropriate for the US (with its relatively rapid vaccination rate), it may not hold true for other countries where mass vaccinations remain slow.
  • These risks are particularly acute for emerging markets, where the pace of vaccinations and the timeline for recovery appear to be generally slower than in their developed country peers. Another risk factor is the possibility of an earlier than expected paring down of the Fed’s policy measures.