BEIJING (Reuters) – China's foreign exchange reserves rose unexpectedly in August, although the yuan caused its biggest monthly decline of 25 years amid escalating trade tensions with the United States.
A currency exchange sign is seen at a branch of the ICBC Bank in Beijing, China, January 3, 2017. REUTERS / Thomas Peter
The country's foreign exchange reserves – the world's largest – rose by $ 3.5 billion in August to $ 3.1072 trillion dollar, the central bank data showed on Saturday.
Economists polled by Reuters had expected reserves to fall $ 4 billion from July to $ 3,300 trillion, probably due to fluctuations in global exchange rates and prices of foreign bonds held by China.
The increase in August was due to China maintaining a stable balance of international payments and generally stable economic growth, the currency regulator said in a statement after the release of data.
Bond prices in the major countries also rose, it added.
China has managed to keep capital outflows under control for the past year despite an escalating trade war with the United States and slowing economic growth at home.
The reserves have fallen from a low October 2018 thanks to capital controls and increasing foreign investment in Chinese equities and bonds.
In August, the yuan CNY = CFXS tumbled about 3.8% against the dollar – the sharpest monthly fall since China unified official and market rates in 1994. It is currently trading at the lowest 11-1 / 2 years. [CNY/]
China allowed the yuan to break through the closely monitored level of $ 7 per dollar on August 5 for the first time since the global financial crisis, days after the United States said it would introduce more tariffs on Chinese goods from September. 1.
Hours after the yuan slipped, Washington China noticed a currency manipulator for the first time since 1994, but China's currency regulator has said that such a move had no basis and did not agree with the facts.
The yuan has now depreciated about 12% against the dollar since the two sides began exchanging tit-for-tat tariffs in April last year.
The regulator said in August that it did not expect a declining weakening of the yuan despite the influence of external factors such as trade frictions, and traders believe that the central bank has tried to curb the decline.
The dollar rose 0.4% in August against a basket of other major currencies. DXY.
With the downward pressure on the economy increasing, China on Friday announced further cuts in banks' reserve requirements to release more funds for lending. Analysts also expected modest interest rate cuts in mid-September.]
It is estimated that growth is nearing the bottom end of the government's target range of 6-6.5% for the full year, after declining to 6.2% in the second quarter, slowest pace of at least 27 years.
China burned through a billion dollars of reserves that supported the yuan in the last economic downturn in 2015, which also saw the devalued currency in a surprising move.
China has ramped up its gold reserves this year.
It had 62.45 million fine troy ounces of gold at the end of August, up 4.85 percent from 59.560 million ounces at the end of 2018.
The value of gold reserves rose to $ 95.45 billion at the end of August from $ 87.876 billion. in late July.
Reporting by Ben Blanchard and Jenny Su; edited by Darren Schuettler and Michael Perry