Currency News: China’s Foreign-exchange Reserves Keep Falling
Currency News
China’s foreign-exchange reserves fell by a record last month. The reason behind it is that the central bank sold dollars to support the yuan after the biggest devaluation in the last 2 decades spurred bets on continued weakness.
The currency hoard declined by almost $100 million to $3.56 trillion at the end of August, from $3.65 trillion a month earlier. Economists surveyed by Bloomberg had forecast a median $3.58 trillion. The yuan weakened in offshore trading and 10-year Treasury futures contracts fell shortly after the release of the data. The shrinkage inn reserves means less money.
Li Miaoxiam, a Beijing-based analyst at Botcom International explained that “If the central bank continues its intervention, China’s foreign-exchange reserves will continue to shrink. The heavier the intervention, the deeper the fall.” Even though the People’s Bank of China is to increase the Tuan exchange rate, it is pretty inevitable the country will see continuous capital outflows and yuan depreciation pressure in the coming months.
“If the central bank continues its intervention, China’s foreign-exchange reserves will continue to shrink — the heavier the intervention, the deeper the fall,” said Li Miaoxian, a Beijing-based analyst at Bocom International Holdings. While the People’s Bank of China is trying to talk up the yuan exchange rate, it’s “inevitable” the nation will see continuous capital outflows and yuan depreciation pressure in the coming months.
The offshore yuan traded in Hong Kong erased gains after the reserves figures were announced. It was trading down 0.2 percent at 6.4827 a dollar as of 6:07 p.m. local time. Ten-year Treasury futures contracts fell 10/32, or $3.13 per $1,000 face amount, to 127 15/32.
The biggest crash in China’s currency in 21 years last month spurred concern that a weaker yuan will hurt countries exporting to China.
