Within the limits set by the Minister of Finance, unhedged reserves can be increased or decreased in size allowing the Bank to lean against extreme cyclical peaks and troughs in the exchange rate that are judged inconsistent with economic fundamentals. The SAA for un-hedged reserves is presented in Figure 6.
In determining the SAA we first specify the most appropriate reserve markets (country allocations) for unhedged reserves, given that allocations are applied to sovereign debt. Currently, the SAA is limited to six highly traded currencies – a more diversified position than was the case in 2008 (Figure 7). Then we specify the duration target for each of those markets individually.