China's yuan shackled by uncertainty over growth, Fed impact

Angelo Anderson
December 7, 2017

Forex increased by $10 billion to $3.12 trillion in November.

Market watchers see a yuan level of 7 against the dollar, as a key touchstone for sentiment in the near term.

Prior to market opening on Thursday, the People's Bank of China (PBOC) set the midpoint lower for the ninth straight trading day to 6.6195 per dollar, 32 pips or 0.05 per cent weaker than the previous fix of 6.6163 - the longest weakening streak since mid-November. This was the tenth consecutive rise in reserves.

China's foreign exchange reserves were little changed last month, extending a spell of stability which some economists believe might encourage Beijing to take further "baby steps" towards full-blown FX liberalisation such as widening the trading band for the yuan.

In January, China's foreign exchange reserves fell below 3 trillion US dollars, but as the economy is on a firmer footing and the yuan continues to stabilize, the stockpile has increased steadily since February.

Gains in non-dollar currencies and valuation effects were the main reasons for the increase, the State Administration of Foreign Exchange said in a statement.

The yuan CNY=CFXS has gained about 5 percent against the dollar this year, following a drop of 6.5 percent in 2016, its biggest annual drop since 1994.

Still, some economists believe it is premature for the Chinese authorities to loosen capital controls as money flight could pick up due to expected USA rate rises and tax cuts.

Monday's data also showed that the country's gold reserves rose to 75.83 billion dollars by the end of November, up from 75.24 billion dollars at the end of October.

Other reports by Iphone Fresh

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