China reserves take a $40b hit on yuan intervention
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.