Great Accumulation
The term “Great Accumulation” refers to central banks buying foreign exchange reserves. China’s central bank, for example, bought large amounts of dollars in the early 2000s, but began to wind that down in 2015. “$4 Trillion Peak for China’s FX Stockpile May Free PBOC’s Hands http://bloom.bg/1AGk0JM via @business The great accumulation winds down…” was cited on Twitter on January 12, 2015.
“The ‘Great Accumulation’ is over,” Deutsche Bank declared in September 2015.
Bloomberg.com
$4 Trillion Peak in China’s FX Hoard Frees PBOC’s Hands: Economy
January 11, 2015 — 9:20 PM EST Updated on January 12, 2015 — 1:39 AM EST
(Bloomberg)—China’s generation-long accumulation of foreign-exchange reserves may be at an end, reshaping monetary policy and eroding a source of demand for U.S. Treasuries.
China’s stockpile, the world’s largest since 2006, will be $3.5 trillion to $4 trillion or lower at the end of 2015, according to 12 of 18 economists in a Bloomberg survey. Eleven said the $3.99 trillion posted on June 30 was the peak.
Twitter
Andrew Szamosszegi
@szamosszegi
$4 Trillion Peak for China’s FX Stockpile May Free PBOC’s Hands http://bloom.bg/1AGk0JM via @business The great accumulation winds down…
8:31 AM - 12 Jan 2015
fastFT/Financial Times (UK)
MARKETS’FX reserves have peaked’ says Deutsche Bank
September 1, 2015
Constantly swelling stashes of foreign currencies at central banks around the world have been a cornerstone of global markets for decades. Get ready for a change, says Deutsche Bank.
“The ‘Great Accumulation’ is over” the bank declares writes Katie Martin. “FX reserves have peaked, Beware QT.”
Zero Hedge
The “Great Accumulation” Is Over: The Biggest Risk Facing The World’s Central Banks Has Arrived
Submitted by Tyler Durden on 09/01/2015 19:10 -0400
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Thanks to the fanfare surrounding China’s stepped up UST liquidation in support of the yuan, the world is beginning to understand what we meant. The accumulation of USD assets held as FX reserves across the emerging world served as a source of liquidity and kept a bid under things like US Treasurys. Now that commodity prices have fallen off a cliff thanks to lackluster global demand and trade, the accumulation of those assets slowed, and as a looming Fed hike along with fears about the stability of commodity currencies conspired to put pressure on EM FX, the great EM reserve accumulation reversed itself. This is the environment into which China is now dumping its own reserves and indeed, the PBoC’s rapid liquidation of USTs over the past two weeks has added fuel to the fire and effectively boxed the Fed in.
On Tuesday, Deutsche Bank is out extending their “quantitative tightening” (QT) analysis with a look at what’s ahead now that the so-called “Great Accumulation” is over.
“Following two decades of unremitting growth, we expect global central bank reserves to at best stabilize but more likely to continue to decline in coming years,” DB begins, before noting what we outlined above, namely that the “three cyclical drivers point[ing] to further reserve draw-downs in the short term [are] China’s economic slowdown, impending US monetary tightening, and the collapse in the oil price.”
The Peter Schiff Show
Meet QT; QE’s Evil Twin
By: Peter Schiff, President and CEO Euro Pacific Capital
By Schiff Staff|September 4th, 2015
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Initially this “Great Accumulation” (as it became known) was undertaken as a means to protect emerging economies from the types of shocks that they experienced during the 1997-98 Asian Currency Crisis, in which emerging market central banks lacked the ammunition to support their free falling currencies through market intervention. It was hoped that large stockpiles of reserves would allow these banks to buy sufficient amounts of their own currencies on the open market, thereby stemming any steep falls. The accumulation was also used as a primary means for EM central banks to manage their exchange rates and prevent unwanted appreciation against the dollar while the Greenback was being depreciated through the Federal Reserve’s QE and zero interest rate policies.