The official reserves of the CNB fell by EUR168m (0.1% m/m) in October, down to EUR131.9bn at the end of the month, according to central bank figures. We see the decline entirely driven by currency fluctuations, as the euro appreciated against the US dollar in October, with an impact of about -0.7pps (we assume USD-denominated assets are about 30% of total). In contrast, reserves rose by 2.3% m/m in the US dollar terms over the month. The reserve breakdown shows that there was an increase in the CNB’s cash accounts, mostly due to freed collateral on repo deals.
In annual terms, official reserves rose by EUR7.5bn (6.1% y/y), with a relatively small impact of fx fluctuations (at about 0.4pps). It goes in line with steady net inflows to the domestic economy, as well as reports of growing reserve assets in balance of payments data. The overall reserve level remains considerable and above that in regional peers, as reserves covered 11 months of imports at the end of October. The main reason is the big accumulation of reserves in 2013-2017, when the CNB had a one-sided fx commitment, keeping the EUR/CZK exchange rate at 27 or weaker.
As in previous months, the CNB didn’t intervene in the fx market in September, according to official data. As we anticipated, client transactions were once again positive, at EUR105m.