Once the latter regain their strength, their currencies will hopefully  BIS central bankers’ speeches  3  follow suit. However, the transition may take long and therefore exceptional policies have been necessary to help mitigate these tensions. Like other emerging economies, early this year we decided to intervene the forex market, by launching a reserve hoarding program that would permit productive sectors to make orderly adjustments to what we foresaw as a protracted exchange rate stress situation. We announced that we would purchase 12 billion dollars over the course of this year, and so far we have purchased 10 billion. We have done this intervention in a non-discretional and sterilized way in order to preserve our policy-making capacities intact and avoid becoming ourselves a source of volatility. Importantly, this purchase of international reserves has been intended not only to reduce exchange rate tensions, but also to strengthen our international liquidity position. Evidence shows that a strong international reserves position helps shield the economy from the adverse effects of external financial shocks. The level of reserves we pursue with this program will put us on a good standing to deal with a more pronounced global decline. As I said, at the beginning of the year the macroeconomic scenario suffered major changes. The increase in commodity prices and the closing of output gaps stoked fears of a resurgence of inflation comparable to that of 2007–2008. Our communiqué of the future course of monetary policy changed significantly in just a few months.
Preliminary document, Central Bank of Chile, March. 10  BIS central bankers’ speeches  Figure 9 Nominal exchange rates in the world (index 01/Jan/00-18/Oct/11=100)  Average  U.S. (2)  U.K.  Mexico  India  Russia  South Korea  Hungary  Philippines  Peru  China  July (3)  South Africa  Range (1)  Poland  40 Israel  40 Eurozone  60 Malaysia  60 Chile  80  Sweden  80  Norway  100  Thailand  100  Colombia  120  Japan  120  Canada  140  Brazil  140  N. Zealand  160  Czech Republic  160  Australia  180  Switzerland  180  Spot October  (1) The range shows highest and lowest levels posted by domestic currency during indicated period. (2) Uses Broad index. (3) At 27 July 2011. Sources: Central Bank of Chile and Bloomberg. Figure 10 Real exchange rate (index, 1986=100) 120  120  110  110  100  100  90  90  80  80  70  70 88  92  1991-2010 average  96  00  04  1996-2010 average  08 TCR  Spot (*)  (*) The observed exchange rate of 18 October 2011. Source: Central Bank of Chile.