China’s forex re­serves rise for first time in 8 months

New Straits Times - - Business World -

China’s for­eign ex­change (forex) re­serves un­ex­pect­edly rose for the first time in eight months last month, re­bound­ing above US$3 tril­lion (RM13.3 tril­lion) as a reg­u­la­tory crack­down and weak­ness in the US dol­lar helped staunch cap­i­tal out­flows.

Re­serves rose US$6.92 bil­lion last month to US$3 tril­lion, the first in­crease since June last year, com­pared with a drop of US$12.3 bil­lion in Jan­uary, when re­serves fell to US$2.99 tril­lion.

Econ­o­mists had ex­pected forex re­serves to drop by US$25 bil­lion to US$2.973 tril­lion last month.

China has tight­ened rules on mov­ing cap­i­tal out­side the coun­try in re­cent months as it seeks to sup­port the yuan and stem a slide in its forex re­serves.

It burned through nearly US$320 bil­lion of re­serves last year but the yuan still fell 6.6 per cent against the US dol­lar, its big­gest an­nual drop since 1994.

The yuan has stead­ied in re­cent weeks as the US dol­lar’s rally lost steam. The Chi­nese cur­rency gained 0.2 per cent last month, and is up 0.8 per cent so far this year.

How­ever, ex­pec­ta­tions of United States in­ter­est rate hikes be­gin­ning as early as next week have rekin­dled fears that the yuan could come un­der re­newed pres­sure.

The prospect of the yuan de­pre­ci­at­ing could in­flame trade ten­sions with the US Pres­i­dent Don­ald Trump’s ad­min­is­tra­tion.

BLOOMBERG PIC

China’s for­eign ex­change re­serves rose to US$3 tril­lion last month, the first in­crease since June last year.

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