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The level of the foreign exchange reserves and source of their change |
In 2023, the foreign exchange reserves increased by $10.5 billion, to a total of $204.7 billion, notwithstanding foreign exchange sales of $8.5 billion. This increase stemmed mainly from capital gains on equity holdings as well as capital gains and interest income from bond holdings. |
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The asset allocation of the foreign exchange reserves |
As of the end of 2023, the asset allocation of the foreign exchange reserves was 54 percent in government assets, 21 percent in equities, 15 percent in spread assets, and 10 percent in corporate bonds. |
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Economic and financial background conditions |
During the course of 2023, global financial markets were volatile, impacted mainly by market assessments regarding the development of inflation, the expected path of central bank interest rates, and the effect of this path on economic activity worldwide. Alongside these factors, markets were impacted by a marked increase in risk to banking sector stability due to difficulties at several banks in the US and Europe, as well as by an increase in geopolitical risk, in view of the concern of an outbreak of a regional war in the Middle East. Toward the end of the year, market sentiment changed and markets trended upward, due to signs indicating the convergence of inflation to central bank targets, which enhanced expectations of the start of interest rate reductions by central banks. |
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The return on the foreign exchange reserves portfolio in terms of the currency benchmark |
Global financial market developments were reflected in the returns on the foreign exchange reserves portfolio: the rate of return of the reserves portfolio in terms of the currency benchmark[1] was 8.3 percent in 2023. The return in terms of the basic benchmark[2] was relatively high compared to previous years, at 4.2 percent. The excess return in 2023 was 4.1 percent, mainly due to equity holdings. |
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[1] Information on the currency benchmark appears below in Chapter B.
[2] Includes short-term government bonds in the currency benchmark currencies with a duration of 6 months.
Additional information on the basic benchmark appears below in Chapter B.
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