China’s FX Reserves Fall in September

China’s foreign exchange reserves shrank by $43.3 billion in September as the central bank stepped up intervention to stabilise the yuan and calm sentiment after a surprise devaluation of its currency had jolted global markets.

China’s reserves, the world’s largest, dropped to $3.514 trillion last month, central bank data showed on Wednesday, after a record slide of $93.9 billion in August.

The devaluation of the yuan on Aug. 11, and the consequent fall in reserves have raised questions about how sustainable China’s efforts to support the yuan are, as capital trickles out of the country due to fears of a deepening economic slowdown and prospects of rising U.S. interest rates.

Analysts expect the reserves to fall further.

“The decline in China’s foreign reserves, while less than market expected, still shows that China’s central bank continued the market intervention in the past month,” said Singapore-based Zhou Hao, senior economist in Asia at Commerzbank.

“As PBoC also intervened into the forward market in the past month, the foreign reserves will likely plunge again when these forward contracts mature,” he said.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza