Foreign-currency reserves are increasing as many central banks around the world react to current economic conditions, most notably in China, Switzerland, and in various emerging markets. Central banks increase foreign reserves by buying non-domestic currencies, increasing their valuations and thereby creating a depreciation in the domestic currency.This is generally done to protect their export sector, which is a major source of growth in most emerging and frontier markets. As economies develop and become wealthier, shifting over to a consumption-based model becomes more tenable and holding back one’s currency becomes less of a priority.The recent buildup in foreign reserves globally is likely a product of the following factors:1. Lingering unknowns over US legislation, such as corporate tax reform, deregulatory initiatives, offshore cash repatriation, and/or infrastructure spending. Higher foreign reserves provide a buffer off which economic shocks can be better handled.2. Uncertainty regarding the future US stance on trade. An overly protectionist bent will adversely impact various markets, both emerging and developed.3. Rising rates in the US and the financial ramifications of such including:a) capital outflows from emerging markets to the US markets (investors seeking higher yield)b) higher debt/borrowing costsc) lesser demand for commodities as the dollar rises (given many commodities are often priced in US dollars as the world’s reserve currency)4. Uncertain political election outcomes in France, Germany, the Netherlands, and (perhaps) Italy.5. The future standing of the UK apart from the EU and how its trade deals will be impacted.(The UK is the world’s fifth-largest economy and represents close to 4% of all global economic activity assuming a world GDP of around $75 trillion.)6. Central banks perceive that risk/reward in the financial markets is negatively skewed to the downside. Of particular note is how rising US rates could influence the continued appetite for risk assets - e.g., stocks, high-yield credit, real estate, emerging market assets - as yields in lower-risk assets start to normalize.7. Most/almost all countries don’t want their currencies to appreciate (or appreciate too quickly). This has caused them to buy up foreign currencies to create market demand for them. In effect, this devalues their own currency in relative terms.Fundamentally, countries are merely attempting to protect their own financial and economic interests and hedge against risks with respect to any macroeconomic concerns they might look to diagnose and preempt.