China’s forex reserves fall to 5-year low

China’s foreign exchange reserves dropped  $19 billion in September to a five-year low, government data showed, with the central bank spending heavily to defend its currency against capital outflows.

The currency  fell to under $3.17 trillion, the People’s Bank of China (PBOC) said on its website Friday, below median analyst forecasts of $3.18 trillion in a Bloomberg News survey.

According to Bloomberg, this makes the third straight month of declines and brought China’s reserves to their lowest level since April 2011.

Analysts said the decline indicated China was selling foreign exchange to buy its currency, yuan amid capital flight spurred by slowing growth in the world’s second largest economy.

The data came days after the yuan’s official entry into the International Monetary Fund’s elite SDR basket of currencies, a symbolic coup for Beijing policymakers who are seeking to expand international use of the currency.

In the months preceding the currency’s formal inclusion, China’s central bank spent “heavily” to keep the yuan’s value stable, roughly $27 billion last month, said Julian Evans-Pritchard of Capital Economics.

But “with the inclusion of the renminbi in the SDR basket now complete, the PBOC may no longer feel the need to intervene as heavily to counter capital outflows”, he said, adding that US Federal Reserve rate hikes could increase depreciation pressure on the yuan in coming months. The report explained.

7 thoughts on “China’s forex reserves fall to 5-year low

  • October 13, 2016 at 9:18 am

    Can I just say what a relief to find someone who really knows what theyre talking about on the internet. You certainly know the best way to bring an problem to light and make it essential. A lot more individuals ought to read this and realize this side of the story. I cant believe youre not far more preferred for the reason that you undoubtedly have the gift.

  • October 15, 2016 at 3:41 pm

    Usually I do not read post on blogs, but I would like to say that this write-up very forced me to try and do it! Your writing style has been surprised me. Thanks, very nice post.

  • October 19, 2016 at 3:26 pm

    Good article and right to the point. I don’t know if this is truly the best place to ask but do you guys have any ideea where to hire some professional writers? Thank you 🙂

Comments are closed.