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HM Treasury News Release

2 February 2000
11/00

UK OFFICIAL HOLDINGS OF FOREIGN CURRENCY AND GOLD:

Part I: UK Government Reserves - January 2000

The overall level of the UK Government's reserves, including the forward book, fell by $1,512 million in January, bringing the end-January total to $31,541 million (£19,459 million⁽¹⁾) compared with $33,053 million (£20,502 million⁽²⁾

) at the end of December 1999.

The underlying change in the reserves, including the forward book, rose by $8 million.

The underlying change excludes capital transactions that are included in the overall change. In January:

there were repayments of $2 million of Exchange Cover Scheme (ECS) borrowing; and

capital repayments on Government Euro Treasury Notes maturing exceeded receipts from those issued by $1,582 million.

The underlying change also excludes the difference between the valuation of the gold auctioned on 25 January 2000 at the "parity" rate of $209.59 per troy ounce and the auction allotment price ($289.50 per troy ounce) amounting to $64 million.

As set out in the Chancellor's letter of 6 May 1997 to the Governor, if the government so instructs then the Bank, acting as its agent, may intervene in the foreign exchange market by buying or selling the government's foreign exchange reserves. If intervention is undertaken, the monthly press release will provide details of the amount and date of the intervention and an explanation of why it was undertaken. No intervention operations were undertaken in January.

Following the International Monetary Fund's revision to their Special Data Dissemination Standard (SDDS) and the G10 central bank report "Enhancing transparency regarding authorities' foreign currency liquidity position" the United Kingdom has decided to disclose additional information on its foreign currency assets and liabilities. On Friday 28 January 2000 the Bank of England published, on its webpage, data on UK foreign currency liquidity for end-December 1999. The data for end-June 1999 onwards can be found at www.bankofengland.co.uk\mfsd\reserves.

Part II: Bank of England Holdings of Foreign Currency and Gold - January 2000

The overall level of the Bank of England's holdings of foreign currency and gold, including the forward book, rose by $3 million in January, bringing the end-January total to $8,095 million (£4,994 million⁽³⁾) compared with $8,092 million (£5,019 million⁽⁴⁾) at the end of December.

There was no underlying change in the level of the Bank of England's holdings including the forward book.

The adjustments to the overall change figure include the change in valuation over the month, changes in holdings arising from changes in foreign currency and gold deposits placed with the Bank by overseas central banks and other customers, changes due to the net effect of foreign exchange swaps conducted in the course of the Bank's money market operations, changes arising from the UK participation in the TARGET system, changes arising from the Bank's Euro Bill programme, and other capital items. The foreign exchange swaps are undertaken as a supplement to the Bank's usual money market techniques to provide sterling liquidity to the market, and are purely technical in nature. The proceeds of the Bank's Euro Bills are used to finance the provision by it of intra-day liquidity, on a secured basis, to participants in CHAPS euro, as part of the arrangements for TARGET.

The Bank's participation in the TARGET system has given rise to euro balances with other central banks operating the system. These are in effect off-set by similar balances that the other central banks hold at the Bank. As a result they are shown net in the table above, where they account for $145 million. The gross claim is $27,105 million.

As set out in the Chancellor's letter of 6 May 1997 to the Governor, the Bank may also undertake foreign exchange operations to intervene in support of its monetary policy objective. If intervention is undertaken, the monthly press release will provide details of the amount and date of intervention and an explanation of why it was undertaken. No intervention operations were undertaken in January.

Following the International Monetary Fund's revision to their Special Data Dissemination Standard (SDDS) and the G10 central bank report "Enhancing transparency regarding authorities' foreign currency liquidity position" the Bank of England has decided to disclose additional information on its foreign currency assets and liabilities. On Friday 28 January 2000 the Bank of England published, on its webpage, data on UK foreign currency liquidity for end-December 1999. The data for end-June 1999 onwards can be found at www.bankofengland.co.uk\mfsd\reserves.

Notes to Editors

1. The Quarterly Report on UK Official Holdings of Foreign Currency and Gold, to be published on 2 March 2000 and covering the quarter ending 30 December 1999, will contain further information about the foreign-currency and gold holdings of the Government and the Bank of England. This will include, for each, the currency composition of foreign-currency assets, the size and currency composition of foreign-currency liabilities and information on intervention operations, if undertaken.

2. The Government and Bank of England figures have been produced on the basis of different accounting methodologies. Therefore, no overall total for the two is shown. Details of the accounting methodologies were included in the Quarterly Report published on 3 March 1998 (covering October-December 1997) and will be included in future Quarterly Reports.

3. The underlying change in the Government's reserves is the result of a variety of transactions, both debits and credits, including, for example, transactions for Government departments, transactions with other central banks and interest receipts and payments. For these reasons, the underlying change should not be taken as an indication of market intervention.

4. Repayments under the Exchange Cover Scheme in January were as follows:

5. Under the current accounting methodology valuation of foreign currency and gold is based on "parity" rates fixed annually for the following financial year. The "parity" rate for gold in use during the financial year 1999-2000 is $ 209.59 per troy ounce. The gold sold at the 25 January auction was allotted at $289.50 per troy ounce.

6. The figures for February 2000 will be published on Thursday 2 March 2000.

7. The figures contained in this press release can also be obtained from the Reuters Monitor (page TREA), Bridge News (page 170), Telerate (p22494) and Topic (p6800).

8. If you have access to the Internet, you can find this information at http://www.hm-treasury.gov.uk and at http://www.bankofengland.co.uk.

1. When converted at the closing market rate of £1 = $1.6209 on 31 January 2000.

2. When converted at the closing market rate of £1 = $1.6122 on 30 December 1999.

3. When converted at the closing market rate of £1 = $1.6209 on 31 January 2000.

4. When converted at the closing market rate of £1 = $1.6122 on 30 December 1999.