Chinese reserves fell Less than feared – TDS

By FXStreet Analysts at TD securities noted that China’s January FX reserves fell and were continuing the pace of large decline (of $108bn) in December.

Key Quotes:

China’s FX reserves fell $99.5bn in January, a substantial further 3% decline but better than we and the market expected.

The lack of acceleration in FX reserves utilization should at least be taken as a positive by the market, despite the brisk pace being maintained, with further macro and FX flows data later in the month providing the broader context.

We continue to see USDCNY moving to 6.95 by year-end, with only a clear communication of an indefinite pause by the Fed or sustained acceleration in Chinese growth taking pressure off of capital flows driving this needed adjustment.

China’s January FX reserves fell by a substantial $99.5bn or 3%, continuing the pace of large decline (of $108bn) in December. This was less than what we had expected, as there has been really no indication that would make us expect that capital outflow pressure from China would have eased off in January.

The external environment brought little in the way of good news, and there were numerous signs of stress significant enough to imply increased capital flight pressure for China. Asia ex-Japan …read more

Source:: FX Street