Forex reserves gain for 4th month
CHINA’S foreign exchange reserves rose in May in the longest winning streak in three years on a weaker US dollar and stable cross-border capital flow.
The reserves climbed for the fourth consecutive month by US$24 billion to US$3.05 trillion by the end of May, data by the People’s Bank of China showed yesterday.
That compared with the US$20.4 billion increase in April and exceeded market hopes for US$10 billion according to a Reuters poll.
The State Administration of Foreign Exchange said in a statement that the increase was driven by improved cross-border capital flow and an overall appreciation of non-US dollar currencies.
China’s cross-border capital flow continued to stabilize while there was a balanced demand and supply of foreign exchange, SAFE said.
Domestic economic growth continued at a reasonable pace amid improved quality and structure, SAFE said, adding that foreign exchange purchasing activities were more rational amid the yuan’s firming and stable international financial markets.
“The key contributors to the better reading could be a positive valuation effect due to a weaker US dollar against the euro and our projected wider trade surplus,” Morgan Stanley said in a note before the data were released.
“Meanwhile, we expect the pace of capital outflows to have remained subdued in May due to better external demand and China’s domestic monetary tightening.”
China’s forex reserves shrank by US$320 billion last year when the yuan weakened 6.5 percent against the US dollar.
Authorities have released measures to regulate cross-border money flow including tighter scrutiny of companies’ overseas investment activities, restricting offshore use of bank cards, and cracking down on underground money markets.
SAFE last week ordered banks to report overseas bank card transactions of above 1,000 yuan in an attempt to prevent illegal cashing in from deposits and credit cards.
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