RMB: Receding tides – Deutsche Bank

By FXStreet Research Team at Deutsche Bank, suggests that it looks like the ‘macro prudential’ measures put by the Chinese authorities, in conjunction with their intervention in onshore and offshore RMB markets, is paying off.

Key Quotes

“Data from multiple sources suggest that the tide of capital outflows is subsiding, at least for now.

Net FX settlements and sales by Chinese banks on behalf of clients was ~- $34bn in the month of February. After adjusting the same ‘fundamental’ flows (February net trade balance and net FDI transacted in foreign currencies), FX outflow from China during the month amounts to $49bn. This was almost half the outflow in January and the smallest outflow since June last year. This number is broadly in line with the estimates derived using FX reserves after adjusting for FX valuation effects.

At a more granular level, outflows appear driven by corporate activity, such as repayment of FX loans. Since July 2015, FX loans have declined by $120bn to $817bn. In addition, importers remain active in buying USD in the spot market to manage their FX liabilities, while exporters are converting only 47% of their export proceeds from foreign to local currency, which is still low, according to our records. …read more

Source:: FX Street