China Oct forex reserves fall most in 9 months

China’s foreign exchange reserves fell the most in nine months in October and by far more than expected to the lowest since March 2011, indicating further capital outflows despite recent signs the world’s second-largest economy is stabilizing. Reserves fell $45.7 billion last month to $3.121 trillion, the biggest monthly decline since January, compared with a near $19 billion fall in September, central bank data showed yesterday.

The October drop was the fourth in a row, and exceeded the previous three months combined. Economists polled by Reuters had expected reserves to dip to $3.14 trillion in October from $3.166 trillion at the end of September, a five-year low.

The central bank is widely believed to have sold US dollars to support the yuan currency in October as it fell to six-year lows. The People’s Bank of China (PBOC) had sold a net 337.5 billion yuan ($50.1 billion) worth of foreign exchange in September, as it sought to support the weakening yuan as outflows picked up.

China’s reserves, the largest in the world, fell by a record $513 billion last year after Beijing devalued the yuan, sparking a flood of capital outflows that threatened to destabilise the economy and alarmed global financial markets. The yuan, also known as the renminbi, fell over 1.5 percent against the dollar in October alone as the greenback rose broadly against major global currencies in anticipation of an interest rate hike by the Federal Reserve.

Currency strategists polled by Reuters expect the yuan to depreciate by nearly 2 percent more in the next 12 months, to levels not seen since the global financial crisis. China’s gold reserves fell to $75.348 billion at the end of October from $78.169 billion at end-September, data published on the People’s Bank of China website showed.