China re­serves take a $40b hit on yuan in­ter­ven­tion

The Pak Banker - - COMPANIES/BOSS -

China's for­eign-ex­change re­serves are ex­pected to drop by some $40 bil­lion a month as the cen­tral bank in­ter­venes to sup­port the yuan, a sur­vey showed. The hold­ings, the world's largest, will de­cline to $3.45 tril­lion by year-end from $3.65 tril­lion at the end of July, based on the me­dian es­ti­mate of 28 strate­gists and traders sur­veyed fol­low­ing last week's sur­prise de­val­u­a­tion of the cur­rency. The fore­casts ranged from $3 tril­lion to $3.71 tril­lion. The cur­rency is seen weak­en­ing 1.6 per­cent to 6.50 a dol­lar in the re­main­der of 2015, the sur­vey showed.

"The cen­tral bank will fre­quently in­ter­vene in the for­eign-ex­change mar­ket in the next three months as it needs to en­sure the cur­rency is sta­ble," said Ken Peng, a strate­gist at Cit­i­group Inc. in Hong Kong, the world's big­gest cur­rency trader. "China will spend some of its for­eign-ex­change re­serves to achieve that goal." The Peo­ple's Bank of China is lim­it­ing the yuan's de­pre­ci­a­tion to pre­vent an ex­o­dus of cap­i­tal as it con­tends with the slow­est eco­nomic growth in more than two decades.

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