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Forex sales hit US$99b in January
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CHINA’S central bank sold a net 644.5 billion yuan (US$99 billion) worth of foreign currency in January, its second-largest monthly sale ever after setting a new record in December, signaling capital outflow pressures.
The People’s Bank of China said its yuan funds outstanding for foreign exchange totaled 24.2 trillion yuan in January, after falling for a third month.
The reserve has recorded only two month-on-month increases since the start of last year, in January and October.
The amount of yuan funds outstanding is an important indicator of foreign capital flows into and out of China.
The government said earlier that the country’s foreign exchange reserves fell US$99.5 billion in January to US$3.23 trillion, their lowest level since May 2012. That followed a record annual drop of US$512.66 billion in 2015.
The yuan depreciation sharpened and capital outflow accelerated in December and January after the United States raised interest rates, affecting cross-border investment flows in emerging markets.
The official reference rate of the yuan weakened from 6.39 to the US dollar in early December to 6.55 at the end of last month.
Central bank Governor Zhou Xiaochuan said earlier this month, however, that there was no basis for a continued depreciation of the yuan and that the monetary authority will be driving foreign exchange rate reforms “with patience.”
In an interview published by Caixin magazine, he said the recent capital outflows were normal as companies adjusted their foreign exchange strategies and some speculative money exited the market.
The yuan closed at 6.5176 to the US dollar in Shanghai yesterday, slightly stronger than Wednesday’s close of 6.5237.
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