China’s FX Reserves Fall in September

China’s foreign exchange reserves shrank by $43.3 billion in September as the central bank stepped up intervention to stabilise the yuan and calm sentiment after a surprise devaluation of its currency had jolted global markets.

China’s reserves, the world’s largest, dropped to $3.514 trillion last month, central bank data showed on Wednesday, after a record slide of $93.9 billion in August.

The devaluation of the yuan on Aug. 11, and the consequent fall in reserves have raised questions about how sustainable China’s efforts to support the yuan are, as capital trickles out of the country due to fears of a deepening economic slowdown and prospects of rising U.S. interest rates.

Analysts expect the reserves to fall further.

“The decline in China’s foreign reserves, while less than market expected, still shows that China’s central bank continued the market intervention in the past month,” said Singapore-based Zhou Hao, senior economist in Asia at Commerzbank.

“As PBoC also intervened into the forward market in the past month, the foreign reserves will likely plunge again when these forward contracts mature,” he said.

via CNBC

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