Yuan and the Trump/Comey effect

The yuan’s fall in value had led many individuals and corporates to buy overseas assets to hedge their risk. The Chinese government in Beijing unveiled a series of capital control measures in November, including stricter scrutiny of overseas payments exceeding US$5 million, and banning deals of more than US$1 billion, deemed to be “outside the investor’s core business”.

This shed US$3.96 billion from China’s foreign exchange reserves in March, after rising by US$6.9 billion in February, bringing the country’s currency stockpile to US$3.0091 trillion, data released by the PBOC showed.

“Capital outflows have now stabilised and we expect exchange reserves to ratchet higher in coming months,” Hu added.

“In particular, tighter controls over corporate overseas investments and measures announced recently to encourage capital inflow should boost reserves.”

Stephen Innes, senior trader at foreign exchange site Oanda, said Beijing’s capital control measures have removed any worries held by both mainland policymakers, and foreign investors.

“The launch of the Bond Connect scheme, and the New Silk Road initiative [“Belt and Road Initiative”] probably suggest the PBOC would prefer a strengthening yuan to attract foreign investors,” Innes said. The Belt and Road is China’s plan to fund the building of hundreds of railway and infrastructure projects in 65 countries to promote its trade with Europe and other countries in the Asia-Pacific region.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Senior Currency Trader and Analyst at OANDA
Stephen has over 25 years of experience in the financial markets and specializes in Asian currencies at OANDA. After having started his trading career with NatWest Bank, he is currently based in Singapore as a Senior Currency Trader and Analyst with OANDA, focusing on the movement of the Aussie Dollar and ASEAN Currencies. Stephen has an extensive trading experience in Interest Rate Futures, Money Markets and Precious Metals. Prior to joining OANDA, he worked with organizations like Cambridge Mercantile, Nat West, Garvin Guy Butler, Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes
Stephen Innes

Latest posts by Stephen Innes (see all)