China’s Forex Reserves Fell in July, Gold Reserves Up
$CNY, $USD, $GLD
China’s Forex (foreign exchange) reserves fell to $3.20-T in July, central bank data showed Sunday.
Economists polled predicted Forex reserves would fall to $3.20-T from $3.21-T at the end of June.
China’s reserves, the largest in the world, fell by $4.10-B in July. The reserves rose $13.4-B in June, rebounding from a 5-year low in May.
China’s Gold reserves rose to $78.89-B at the end of July, up from $77.43 billion at end-June, data published on the People’s Bank of China website showed.
Net Forex (foreign exchange) sales by the People’s Bank of China (PBOC) in June jumped to their highest in 3 months, as the central bank sought to shield the yuan from market volatility caused by Britain’s decision to leave the EU.
China’s foreign exchange regulator recently said China would be able to keep cross-border capital flows steady given its relatively sound economic fundamentals, solid current account surplus and ample foreign exchange reserves.
China’s foreign reserves fell by a record $513-B last year after it devalued the yuan currency in August.
The RMB Yuan eased another 2% this year and is hovering near 6-year lows, but official data suggests speculative capital flight is under control for now, thanks to tighter capital controls and currency trading regulations.
Economists are divided over how much money is still flowing out of the country via other channels, with opaque policymaking and some inconsistency in the data raising suspicions that the fall in the yuan may be masking capital outflow pressure.
After the RMB Yuan slipped to below the psychologically important 6.7 Yuan to 1 USD on 18 July, it has seen a mild rebound as the central bank stepped in to control the pace of its depreciation.
China watchers expect the RMB Yuan will resume its descent soon, risking a renewed surge in capital outflow.
A poll last Wednesday showed analysts believe the RMB Yuan may fall more than 3% Vs the USD by a year from now, more than expected just a month ago, as the economy struggles to maintain momentum and as the dollar edges up on views of an eventual US interest rate rise.
China will keep the RMB Yuan stable and continue with market-based interest rate reform, the central bank said Wednesday.
The country’s economy expanded slightly faster than expected in Q-2 but private investment growth shrank to a record low, suggesting future weakness that could pressure the government to roll out more support measures.
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