China FX reserves drop in September amid Sino-US trade tension

By Mubasher

Mubasher: China’s foreign exchange (FX) reserves dropped in September, as escalating trade row with the US triggered worries over capital outflow and further drop in the yuan’s (CNY) value.

China’s foreign reserves, the largest in the world, fell by $22.69 billion to $3.087 trillion last September, compared with $3.110 trillion, the People’s Bank of China (PBOC) said on Sunday. This marked the largest drop since last February.

The decline in reserves came due to changes in the value of foreign currencies and asset prices, the State the State Administration of Foreign Exchange (SAFE) said in a statement, predicting that holdings would remain at a steady level despite several fluctuations in value.

“China’s foreign-exchange reserves should decline given a stronger dollar and increasing depreciation pressures on the yuan, which could prompt the PBOC to intervene,” Mizuho Bank senior currency strategist Ken Cheung told Bloomberg.

So far this year, China’s reserve holdings saw slight fluctuations in value as capital rules were still in effect and policy makers moved to stabilise a falling yuan.

However, concerns over escalating trade conflict between Beijing and Washington, negative sentiment across China and a rising US dollar would yet test the world’s second largest economy.

By 3:29 pm GMT, the USD/CNY pair rose 0.90% to CNY 6.9307.

This article provided by NewsEdge.