Today, the Riksbank announced it plans to add NOK and DKK to its currency reserve portfolio, meanwhile indicating it will raise USD exposure and reduce EUR exposure. The change in composition is set to take place in Q1 19. The new investment policy is motivated by a need for contingency and aims to capture better the short-term funding needs of the Swedish banks.
According to the new policy, the FX reserve should consist of assets denominated in USD ( minimum 55%), EUR ( minimum 15%), GBP ( minimum 3%) and NOK and DKK ( minimum 1% each). The remaining maximum 25% is freely allocated among these or other approved currencies.
The current policy (set to be replaced in January) states that the FX reserve should consist of a minimum of 42% USD and 28% EUR, where a maximum of 30% is to be allocated among USD, EUR or other approved currencies. On top of the FX reserve now formally having to include GBP, NOK and DKK (the FX reserve has included GBP since 30 April 2018), the new policy also limits the so-called 'deviation mandate' to 25% of the total FX reserve.
As of 30 April 2018, the market value of the FX reserve was SEK462.2bn. At this date, the FX portion consisted of approximately (that is, correcting for the share of gold in the reserve) 52% USD, 34% EUR, 5% AUD, 4.3% GBP and 3% CAD (the numbers do not add to 100 due to rounding).
FX implications . On top of buying NOK and DKK, we expect to see the Riksbank buying USD and reducing its exposure to EUR, given the downward adjustment of its minimum exposure to EUR. However, we do not expect this to have any material impact on the market, as the amounts are still negligible relative to total market turnover. For the NOK and DKK effects specifically, see Flash Comment - Riksbank to buy DKK and NOK in Q1 19 , 7 November.
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