Forex reserves rise unexpectedly
Print Edition
CHINA’S foreign exchange reserves unexpectedly rose by US$13 billion last month, officials said yesterday, as pressure on the yuan to depreciate apparently eased.
The world’s largest currency hoard rose to US$3.21 trillion in June, the People’s Bank of China said on its website. The result follows months of declines.
A forecast by Bloomberg News had predicted the reserves would decline US$20 billion.
Part of the increase is explained by the rising value in recent weeks of the yen, which makes up some of China’s foreign exchange reserves, while capital outflows from China seem to have slowed.
“The latest numbers nonetheless underline that pressure on the currency has eased significantly, for now at least,” Capital Economics said in a note.
It added that the figures implied China received US$19 billion of net capital inflows in June, the first time that such inflows have outpaced outflows since 2014.
China’s total foreign exchange reserves remain down 20 percent from their US$4 trillion peak in 2014.
The yuan fell to its lowest since 2010 this week, pressured by rising demand for the safe-haven US dollar and the yen after Britain voted to leave the EU.
That suggests that China will begin to run down its reserves again in the near future, to avoid more rapid depreciation, analysts said.
“The yuan will drop further as Beijing apparently has a bias for depreciation due to the weaker economy, which will lead to more outflows and pressure the reserves in the second half,” said Nathan Chow, an economist at DBS Group Holdings Ltd.
China’s economy grew at its slowest rate in a quarter century last year, and a gauge showed activity in Chinese factories suffered its sharpest deterioration for four months in June.
The figures were the latest to highlight a growth slowdown in the country as the global outlook weakens.
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