FXStreet (Delhi) – Sebastien Galy, Macro strategist at Deutsche Bank, notes that the emerging markets off balance sheet reserves are dropping fast. Key Quotes “The Retreat of Global Balance Sheets leaves some emerging market foreign reserves fighting a controlled retreat with investors pondering their diminishing size. By focusing on the headline number they may be losing relevant information including off-balance sheet positioning. These items form a buffer above the headline number for the reserves that is shrinking very rapidly. This is the case for example in Russia, Mexico and Chile, while it gives a far better idea of the pressures on the Brazilian real. The incentive to generate dollar liquidity suggests any rally in non dollar currencies should meet some forced selling. Most foreign reserves are commendably clear about their risk management and holdings. In particular, many release detailed information on the composition of their reserves via the IMF COFER database and often enough in INFER and SEFER. The COFER includes deposits with commercial counterparties, short term predetermined outflows and potentially over three hundred items. This additional information can prove crucial in analyzing the currency reserves that are actually available for intervention. All of these items form a buffer of sort for the reserves in addition to the headline.” For more information, read our latest forex news.