China Oct forex re­serves fall most in 9 months

Kuwait Times - - BUSINESS -

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.

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